What is the effect of the Carl's Jr. Guarantee on the Guarantor's personal liability?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- **2.
Guarantee and Assumption of Franchisee's Obligations.** Guarantors hereby: (A) guarantee to CJR and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement or at law or in equity, that Franchisee and any assignee of Franchisee's interest under the Agreement shall: (1) punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement and (2) punctually pay all other monies owed to CJR and/or its affiliates; (B) agree to be personally bound by each and every provision in the Agreement, including, without limitation, the provisions of Sections 20 and 25; and (C) agree to be personally liable for the breach of each and every provision in the Agreement.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Guarantee and Assumption of Franchisee's Obligations stipulates that guarantors, who are either members of the Franchisee's Continuity Group, a 10% Owner, or their spouse, personally and unconditionally agree to be bound by the restrictions outlined in Section 20 of the Franchise Agreement. This guarantee extends for the term of the agreement and beyond, as legally or equitably required.
Specifically, the guarantors ensure that the Franchisee and any assignee will punctually fulfill every commitment, agreement, and covenant detailed in the Franchise Agreement. They also guarantee the timely payment of all monies owed to Carls Jr. and its affiliates. Furthermore, the guarantors agree to be personally bound by every provision in the Agreement, including Sections 20 and 25, and accept personal liability for any breaches of these provisions.
In essence, the guarantee means that the personal assets of the guarantors are at risk if the franchisee fails to meet their obligations under the Franchise Agreement. This includes not only financial obligations but also adherence to all operational and brand standards set forth in the agreement. Prospective franchisees should carefully consider the implications of this personal guarantee and seek legal counsel to fully understand their obligations and potential liabilities.