Are all owners of a Chocolate Fish Coffee franchise required to execute personal guarantees?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- 2.5 Guaranty. If Franchisee is an entity, then Franchisee shall have each Owner sign a personal guaranty of Franchisee's obligations to Chocolate Fish Franchising, in the form of Attachment 3.
Guarantor agrees as follows:
- **1.
Guaranty.** Guarantor hereby unconditionally guarantees to Chocolate Fish Franchising and its successors and assigns that Franchisee shall pay and perform every undertaking, agreement and covenant set forth in the Franchise Agreement and further guarantees every other liability and obligation of Franchisee to Chocolate Fish Franchising, whether or not contained in the Franchise Agreement.
Guarantor shall render any payment or performance required under the Franchise Agreement or any other agreement between Franchisee and Chocolate Fish Franchising upon demand from Chocolate Fish Franchising.
Guarantor waives (a) acceptance and notice of acceptance by Chocolate Fish Franchising of this Guaranty; (b) notice of demand for payment of any indebtedness or nonperformance of any obligations of Franchisee; (c) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; (d) any right Guarantor may have to require that an action be brought against Franchisee or any other person or entity as a condition of liability hereunder; (e) all rights to payments and claims for reimbursement or subrogation which any of the undersigned may have against Franchisee arising as a result of the execution of and performance under this Guaranty by the undersigned; (f) any law which requires that Chocolate Fish Franchising make demand upon, assert claims against or collect from Franchisee or any other person or entity (including any other guarantor), foreclose any security interest, sell collateral, exhaust any remedies or take any other action against Franchisee or any other person or entity (including any other guarantor) prior to making any demand upon, collecting from or taking any action against the undersigned with respect to this Guaranty; and (g) any and all other notices and legal or equitable defenses to which Guarantor may be entitled.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, if the franchisee is an entity, each owner must sign a personal guarantee of the franchisee's obligations to Chocolate Fish Coffee. This guarantee is in the form of Attachment 3 to the Franchise Agreement.
This means that if a franchisee is a corporation, LLC, or other business entity rather than an individual, each individual or entity that owns a stake in the franchisee company must personally guarantee the franchisee's financial and contractual obligations to Chocolate Fish Coffee. This personal guarantee makes the owner(s) personally liable for the debts and obligations of the franchise, even if the business entity fails.
The guarantor unconditionally guarantees that the franchisee will pay and perform every undertaking, agreement, and covenant set forth in the Franchise Agreement and further guarantees every other liability and obligation of franchisee to Chocolate Fish Coffee, whether or not contained in the Franchise Agreement. The guarantor must render any payment or performance required under the Franchise Agreement or any other agreement between the franchisee and Chocolate Fish Coffee upon demand from Chocolate Fish Coffee.
Personal guarantees are a common practice in franchising, especially for new or smaller businesses, as they provide the franchisor with additional security. The guarantor also waives certain rights, including requiring Chocolate Fish Coffee to first pursue action against the franchisee before demanding payment or action from the guarantor. Prospective franchisees should carefully review the personal guarantee document (Attachment 3) and understand the full extent of their obligations and potential liabilities before signing the Franchise Agreement.