If the Chocolate Bash franchisee is an entity, what is required of each owner?

According to Chocolate Bash's 2024 Franchise Disclosure Document, if the franchisee is a business entity, each owner must sign a personal guaranty of the franchisee's obligations to Chocolate Bash. This guaranty is formalized in a document referred to as Attachment 3. An "Owner" is defined as any person or entity that directly or indirectly owns or controls any equity of the franchisee. If the franchisee is an individual, then the franchisee is considered the "Owner".

This requirement means that each individual or entity with an ownership stake in the franchisee company is personally responsible for ensuring the franchisee meets its financial and contractual obligations to Chocolate Bash. This personal guaranty provides Chocolate Bash with an additional layer of security, as they can pursue the personal assets of the owners if the franchisee entity fails to meet its obligations.

Prospective franchisees should carefully review Attachment 3, the personal guaranty form, to fully understand the scope of the obligations they will be personally guaranteeing. They should also seek legal counsel to assess the implications of signing such a guaranty, as it could expose their personal assets to risk. Franchisees in community property states such as California should be aware that doing so could jeopardize the marital assets of non-owner spouses.