Under the Chicken Guy franchise agreement, who is required to jointly and severally guarantee the Franchisee's payment and performance?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) All members of the Continuity Group and each of their spouses, if applicable, shall jointly and severally guarantee Franchisee's payment and performance under this Agreement and shall bind themselves to the terms of this Agreement pursuant to the attached Guarantee and Assumption of Franchisee's Obligations ("Guarantee"). Unless Franchisee is a publicly-held entity, all of Franchisee's
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) If Franchisee is an individual, or a partnership comprised solely of individuals, Franchisee makes the following additional representations and warranties: (a) each individual has executed this Agreement; (b) each individual shall be jointly and severally bound by, and personally liable for the timely and complete performance and a breach of, each and every provision of this Agreement; and (c) notwithstanding any transfer for convenience of ownership, pursuant to Section 19.D., each individual shall continue to be jointly and severally bound by, and personally liable for the timely and complete performance and a breach of, each and every provision of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the requirements for guarantees depend on the franchisee's business structure. If the franchisee is a corporation, limited liability company, or partnership, all members of the Continuity Group and their spouses (if applicable) must jointly and severally guarantee the franchisee's payment and performance under the Franchise Agreement. The Continuity Group is a set of individuals whom Chicken Guy and the franchisee have designated.
For corporate franchisees, the Continuity Group must own at least 51% of the voting securities. For limited liability companies, the Continuity Group must own at least 51% of the membership interests. If the franchisee is a partnership, the Continuity Group must have at least a 51% interest in the operating profits and losses and at least a 51% ownership interest in the franchise. Any changes to the Continuity Group or their ownership interests require an update to the Data Sheet attached to the franchise agreement.
If the franchisee is an individual or a partnership comprised solely of individuals, each individual must execute the agreement and will be jointly and severally bound by, and personally liable for, the performance of every provision within the agreement. Even if ownership is transferred for convenience, each individual remains jointly and severally liable. Chicken Guy also retains the right to require officers, directors, and holders of 10% or more of the franchisee's legal or beneficial interest (10% Owners), along with their spouses, to guarantee the franchisee's payment and performance. Chicken Guy can waive this requirement at its discretion. 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.