Under the Chicken Guy Restaurant Development Agreement, what individuals are considered 'Guarantors' who must provide a guarantee?
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, the individuals considered 'Guarantors' under the Restaurant Development Agreement include officers, directors, and anyone holding a legal or beneficial interest of 10% or more in the franchisee, as well as their spouses. These individuals must jointly and severally guarantee the franchisee's payment and performance under the agreement. This means each guarantor is fully responsible for all obligations. Chicken Guy retains the right to request personal financial statements from any guarantor.
Chicken Guy emphasizes its preference for guarantees from individuals rather than corporations or other entities. 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. For example, if a corporation owns 10% of the franchise, Chicken Guy can demand that the individuals who own the corporation provide the guarantee.
Furthermore, if the franchisee, any guarantor, or any related entity holds interests in other Chicken Guy restaurants, they must execute a cross-guarantee, ensuring all obligations for all such restaurants are covered. This requirement can be waived by Chicken Guy at its discretion. The guarantee ensures that Chicken Guy has recourse to specific individuals who are financially committed to the success and obligations of the franchise, providing an additional layer of security for the franchisor.