Why does Carvel require a Guaranty to enter into a Franchise Agreement?

According to Carvel's 2025 Franchise Disclosure Document, a Guaranty is required for the Franchise Agreement because Carvel "would not have agreed to enter into the Franchise Agreement without this Guaranty." The Guarantor, who is an owner of the Franchisee, anticipates benefiting from the operation of the franchise. By signing the Guaranty, the Guarantor acknowledges that they have read and understood the terms and conditions of the Franchise Agreement.

The Guaranty ensures that the Guarantor is responsible for the Franchisee's obligations to Carvel. Specifically, the Guarantor guarantees the full and prompt payment and performance of all obligations of the Franchisee, its owners, officers, directors, agents, and employees to Carvel under the Franchise Agreement. This includes any amendments to the Franchise Agreement or any other agreement between the Franchisee and Carvel. The Guarantor is also responsible for the full and prompt payment or reimbursement of all amounts, costs, expenses, claims, liabilities, or obligations Carvel incurs under the Franchise Agreement.

In essence, the Guaranty acts as a security measure for Carvel, ensuring that there is a party (the Guarantor) who is ultimately responsible for the financial and operational obligations of the franchise. This is a common practice in franchising, especially when the Franchisee is a business entity (like an LLC) rather than an individual, to ensure that there is a responsible party with personal assets backing the franchise's commitments. The Guaranty is part of Schedule C of the franchise agreement.