For Checkersrallys franchises in California, what is the potential consequence of signing a personal guarantee?

According to Checkersrallys's 2025 Franchise Disclosure Document, franchisees in California, along with their spouses if married, must sign a personal guarantee. This guarantee makes them individually liable for the financial obligations under the franchise agreement. The critical consequence of this personal guarantee is that the franchisee's and their spouse's marital and personal assets are placed at risk should the Checkersrallys franchise fail. This means that in the event of financial difficulties or failure of the franchise, personal assets such as savings, property, and other valuables could be used to satisfy the debts and obligations of the franchise.

This requirement is highlighted in an addendum specifically for California, emphasizing its importance for prospective franchisees in that state. The FDD explicitly states this personal guarantee as a special risk to consider. This is a significant point for potential franchisees to understand, as it directly ties their personal financial well-being to the success of the Checkersrallys franchise.

Such personal guarantees are a common practice in franchising, particularly for new or smaller franchisees, as they provide the franchisor with additional security. However, the extent of personal liability can vary, so it is crucial for franchisees to fully understand the terms and potential implications of the guarantee. Given the potential risks, prospective Checkersrallys franchisees in California should seek legal counsel to review the franchise agreement and personal guarantee to fully understand their obligations and potential exposure.