What additional guarantees of obligations can City Wide require from the transferee?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
13.4.9 CITY WIDE may require any transferee of any shares of stock or interest of any kind or nature in Franchisee, any Affiliated Company, or the Owner and his/her spouse or domestic partner to guarantee the obligations of Franchisee under this Agreement or under any new Franchise Agreement entered pursuant to Section 13.4.10 below.
13.4.11 The transferee will execute the then-current form of franchise agreement, pay all required fees (including Initial Fees) and will provide such additional guaranties of its obligations under such franchise agreement as CITY WIDE may require.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, City Wide has the right to require transferees to provide additional guarantees of their obligations under the franchise agreement. Specifically, City Wide may require any transferee of shares of stock or interest in the franchisee, any affiliated company, or the owner and their spouse or domestic partner to guarantee the obligations of the franchisee. These obligations would be under the existing agreement or any new franchise agreement entered into as part of the transfer.
This means that if a franchisee sells their business, City Wide can demand that the buyer (transferee) provide a personal guarantee or other assurance that all financial and operational responsibilities outlined in the franchise agreement will be met. This is a mechanism for City Wide to protect its interests and ensure the ongoing success and compliance of the franchise unit under new ownership. The requirement for additional guarantees is at City Wide's discretion.
For a prospective franchisee, this highlights the importance of understanding all obligations under the franchise agreement, as any future buyer may be required to guarantee these same obligations. It also emphasizes that the transfer process involves more than just finding a buyer; City Wide has significant control over who can become a franchisee and what guarantees they must provide. This is a fairly standard practice in franchising, as franchisors want to ensure that new owners are fully committed to the business and capable of fulfilling the franchise obligations.