For the Churchs Chicken Guaranty Agreement, is the Guarantor required to be an individual?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
| This Guaranty Agreement (this "Guaranty") is executed by, ("Guarantor") in favor of Cajun Global LLC, a Delaware | a resident of limited liability | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------| | company, | | | d/b/a | | | Church's | | | Texas Chicken | | | ("Cajun"). | | | Recitals | | | A. ("Developer") has entered into a Development with Cajun (the "Agreement"; capitalized terms used in this Guaranty but not defined meanings given in the Agreement). | Agreement herein have the | | B. Guarantor owns an equity interest in Developer, and as such is a direct Agreement. | beneficiary of the | | C. In order to induce Cajun to execute the Agreement, Guarantor desires to obligations of Developer to Cajun as set forth herein. | guarantee the | | NOW THEREFORE, in consideration of Cajun's execution of the Agreement, agreements and obligations set forth below, and other good and valuable consideration, sufficiency of which are hereby acknowledged, Guarantor agrees as follows: | as well as the the receipt and | Accordingly, if any 5% Owner is not an individual, Cajun shall have the right to have the Guaranty executed by individuals who have only an indirect ownership interest in Developer.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the Guaranty Agreement is executed by the Guarantor in favor of Cajun Global LLC. The Guarantor owns an equity interest in the Developer. Cajun may require individuals with indirect ownership in the Developer to execute the Guaranty if any 5% Owner is not an individual.
This implies that while the Guarantor often has a direct equity interest, Churchs Chicken retains the right to require guarantees from individuals even with indirect ownership, especially if direct owners are not individuals. This flexibility allows Churchs Chicken to secure its financial interests by ensuring that responsible parties are held accountable, regardless of the ownership structure of the Developer.
For a prospective franchisee, this means that depending on the ownership structure of their development entity, they or related individuals might be required to sign a Guaranty. It is important to clarify with Churchs Chicken under what specific conditions they would require guarantees from individuals with indirect ownership, and what the scope of those guarantees would be. This ensures that all parties understand their obligations and potential liabilities under the franchise agreement.