What agreement must new recipients of an ownership interest in a Cinch I.T. franchise sign?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) In the event You are a business entity (including but not limited to a corporation, a limited liability company, a partnership, a limited liability partnership, a trust), in addition to being newly formed, You must complete and sign the Principal Owner's Statement attached to this Agreement as Addendum D and each individual with an ownership interest in You must also sign Addendum D. Further, You represent, warrant and covenant that:
- (i) You are newly formed, duly organized and validly exist under the laws of the state in which You were formed;
- (ii) You are duly qualified and are authorized to do business in each jurisdiction in which Your business activities or the nature of the properties owned by You require such qualification;
- (iii) The execution of and transactions contemplated by this Agreement are within Your powers;
- (iv) The ownership interests in You are accurately and fully listed in Addendum D;
- (v) Each and every person with an ownership interest in You shall sign the Guaranty Agreement attached to this Agreement as Addendum C and You shall provide the original signed Guaranty Agreement to Us;
- (vi) The stated purpose of the business entity shall consist only of the development, ownership, operation and maintenance of the CINCH I.T. Franchised Business;
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, if a franchisee is a business entity, each individual with an ownership interest in the entity must sign the Guaranty Agreement attached to the Franchise Agreement as Addendum C. They must also complete and sign the Principal Owner's Statement attached to the agreement as Addendum D.
This requirement ensures that Cinch I.T. has a personal guarantee from each owner, holding them accountable for the franchise's performance and adherence to the agreement terms. This is a common practice in franchising, as it mitigates the risk to the franchisor by ensuring that individuals with a stake in the business are personally invested in its success and compliance.
Furthermore, the business entity itself must be newly formed and its stated purpose must consist only of the development, ownership, operation, and maintenance of the Cinch I.T. Franchised Business. This restriction ensures that the franchisee's focus remains solely on the Cinch I.T. business, preventing potential conflicts of interest or divided attention. The franchisee must also represent that the ownership interests are accurately and fully listed in Addendum D.