Who must sign a guarantee assuming the Chicken Guy franchisee's obligations?
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 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 39–40)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the individuals required to guarantee a franchisee's obligations include the franchisee, all officers, directors, and holders of a legal or beneficial interest of 10% or more in the franchisee (referred to as "10% Owners"), and each of their spouses, if applicable. These individuals must jointly and severally guarantee the franchisee's payment and performance under the Franchise Agreement and bind themselves to its terms through the attached Guarantee. However, Chicken Guy retains the discretion to waive this requirement for some or all of these individuals.
Chicken Guy also specifies that it intends for individuals, rather than entities like corporations or LLCs, to execute the Guarantee for 10% Owners. Therefore, if a 10% Owner is a corporation or other entity, Chicken Guy can require individuals with an indirect ownership interest in the franchisee (e.g., those who have ownership in the corporation that owns the franchise) to execute the Guarantee.
Furthermore, if the franchisee, any guarantor, or any parent, subsidiary, or affiliate of the franchisee holds an interest in other restaurants franchised by Chicken Guy or its affiliates, they must execute a cross-guarantee to cover all obligations for those restaurants, unless Chicken Guy waives this requirement in writing. This ensures that obligations across multiple Chicken Guy franchises are secured.
This requirement ensures that Chicken Guy has recourse to multiple parties to secure the financial and operational obligations of its franchisees. Prospective franchisees should carefully review these guarantee requirements and understand the extent of their personal liability, as well as the liability of their owners and affiliates, before entering into a franchise agreement with Chicken Guy.