What sections of the Chicken Guy Restaurant Franchise Agreement are Guarantors personally bound by?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
officers, directors and all holders of a legal or beneficial interest in Franchisee of 10% or more ("10% Owners") and each of their spouses, if applicable, also shall jointly and severally guarantee Franchisee's payment and performance under this Agreement and also shall bind themselves to the terms of this Agreement pursuant to the attached Guarantee. Notwithstanding the foregoing, Chicken Guy reserves the right, in its sole discretion, to waive the requirement that some or all of the previously described individuals execute the attached Guarantee. Chicken Guy reserves the right to require any guarantor to provide personal financial statements to Chicken Guy from time to time.
- (2) With respect to 10% Owners, Franchisee acknowledges that, unless otherwise agreed to in writing by Chicken Guy, it is Chicken Guy's intent to have individuals (and not corporations, limited liability companies or other entities) execute the Guarantee. Accordingly, if any 10% Owner is not an individual, Chicken Guy shall have the right to have the Guarantee executed by individuals who have only an indirect ownership interest in Franchisee. (By way of example, if a 10% Owner of Franchisee is a corporation, Chicken Guy has the right to require that the Guarantee be executed by individuals who have an ownership interest in that corporation.)
- (3) If Franchisee, any guarantor or any parent, subsidiary or affiliate of Franchisee holds any interest in other restaurants that are franchised by Chicken Guy or its affiliates, the party who owns that interest shall execute, concurrently with this Agreement, a form of cross-guarantee to Chicken Guy and its affiliates for the payment of all obligations for such restaurants, unless waived in writing by Chicken Guy in its sole discretion. For purposes of this Agreement, an affiliate of Franchisee is any company controlled, directly or indirectly, by Franchisee or Franchisee's parent or subsidiary.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, individuals guaranteeing a franchisee's obligations are bound by the terms of the Franchise Agreement. Specifically, officers, directors, and those holding a 10% or greater legal or beneficial interest in the franchisee, along with their spouses, must jointly and severally guarantee the franchisee's payment and performance under the agreement. These individuals also bind themselves to the terms of the agreement through a Guarantee. Chicken Guy retains the discretion to waive this guarantee requirement for some or all individuals.
Chicken Guy intends for the Guarantee to be executed by individuals rather than entities like corporations or LLCs. If a 10% owner is not an individual, Chicken Guy can require individuals with an indirect ownership interest in the franchisee to execute the Guarantee. This ensures that personal assets are at stake, rather than corporate assets which may have additional layers of protection.
Furthermore, if a franchisee, guarantor, or their affiliates have interests in other Chicken Guy franchises, they may be required to execute a cross-guarantee, ensuring all obligations across different franchise locations are met. This cross-guarantee can be waived by Chicken Guy at its discretion. This requirement aims to protect Chicken Guy from financial risks associated with franchisees who have multiple locations or related business interests.