If the transferee of a Cicis franchise is a legal entity, what obligations do the transferee's owners have?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
(d) the transferee must enter into a written agreement, in form and substance satisfactory to us, assuming full, unconditional, joint and several liability for, and agreeing to perform from the date of the transfer, all obligations, covenants, and agreements contained in this Agreement; and, if the transferee is a legal entity, each of the transferee's owners as we designate must execute such agreement and jointly assume and guarantee the entity's performance of all such obligations, covenants, and agreements;
(e) the transferee must execute, for a term ending on the expiration date of this Agreement and with such renewal terms as may be provided by this Agreement, our thencurrent standard form of franchise agreement and all other ancillary agreements as we may require, which agreements will supersede this Agreement and its ancillary documents in all respects and the terms of which agreements may differ from the terms of this Agreement, including a higher percentage Royalty Fee and Fund Contribution or expenditure requirement; provided, however, that the transferee will not be required to pay any initial franchise fee; and, if the transferee is legal entity, such of transferee's owners as we may designate must execute such agreement and jointly assume and guarantee the entity's performance of all such obligations, covenants, and agreements;
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if a Cicis franchise is transferred to a legal entity, certain owners of that entity must enter into a written agreement with Cicis. These designated owners must assume full, unconditional, joint, and several liability for the entity's obligations. This means they are personally responsible for ensuring the franchise complies with all terms and conditions of the franchise agreement.
Furthermore, these owners must execute Cicis's current standard form of franchise agreement and any other ancillary agreements. This agreement will supersede the original agreement and may include different terms, such as higher royalty fees or fund contribution requirements. However, the transferee will not be required to pay an initial franchise fee. The designated owners again jointly assume and guarantee the entity's performance of all obligations under this new agreement.
In practical terms, this requirement ensures that Cicis has recourse to individual guarantors who have a vested interest in the franchise's success. By requiring personal guarantees from the owners, Cicis aims to mitigate the risk of non-compliance or default by the legal entity operating the franchise. This is a fairly standard practice in franchising, as it provides an additional layer of security for the franchisor.