If a Checkersrallys franchisee is a legal entity, what obligation do the owners have?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, partnership or any other type of legal entity, the provisions of the Franchise Agreement (and, if applicable, the Development Agreement) also apply to your owners by virtue of the requirement that all your owners personally guarantee, and be personally bound by, your obligations under the Franchise Agreement (or, if applicable, the Development Agreement).
Source: Item 1 — THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 9–14)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if a franchisee is a corporation, limited liability company, partnership, or any other type of legal entity, the owners must personally guarantee the obligations under the Franchise Agreement or Development Agreement. This means that the owners are personally bound by the obligations of the legal entity under the agreements.
This requirement is a common practice in franchising. Franchisors like Checkersrallys often require personal guarantees to ensure that there is recourse beyond the business entity itself. This protects Checkersrallys in case the franchisee's business fails or does not meet its obligations. The personal guarantee essentially makes the owner(s) of the franchisee directly liable for the debts and obligations of the franchise.
For a prospective Checkersrallys franchisee, this means that even if the franchise is operated through a separate legal entity, their personal assets could be at risk if the franchise fails to meet its financial or contractual obligations. It is crucial for potential franchisees to fully understand the implications of a personal guarantee and to seek legal and financial advice before signing the Franchise Agreement or Development Agreement.