What form must the guarantee be in for Chem Dry franchisee owners with more than 5% ownership interest?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
- i. the transferee shall (if the transfer is of this Agreement), or FRANCHISEE shall (if the transfer is of a controlling ownership interest in FRANCHISEE or one of its Owners), sign CDI's then current form of franchise agreement, the personal guaranty and all other required exhibits, any and all of the provisions of which may differ materially from any and all of those contained in this Agreement, but which franchise agreement will not provide for payment of an initial license fee or purchase of an Initial Package;
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, if a Chem Dry franchisee transfers their franchise, the franchisee (if the transfer is of a controlling ownership interest in the Chem Dry franchisee or one of its Owners) must sign the personal guaranty. This guaranty must be in Chem Dry's then-current form. The provisions within this guaranty may differ materially from those in the original agreement.
This requirement ensures that Chem Dry can enforce the franchise agreement's obligations against the new controlling owner. The new owner's personal guarantee provides Chem Dry with a direct legal recourse against the individual's assets, should the franchise business fail to meet its financial or operational obligations. This is a standard practice in franchising, as it protects the franchisor's interests and ensures the franchisee is fully committed to the business.
Prospective Chem Dry franchisees should carefully review the then-current form of the personal guaranty before signing the franchise agreement. Understanding the obligations and potential liabilities outlined in the guaranty is crucial. Franchisees should seek legal counsel to fully comprehend the implications of providing a personal guarantee, as it can have significant financial consequences.