Can City Wide require a prospective transferee to provide additional guaranties of its obligations under a new franchise agreement?
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 a transferee to provide additional guaranties of their obligations under a new franchise agreement. Specifically, prior to the consummation of any transfer, the transferee will execute the then-current form of the franchise agreement, pay all required fees, including initial fees, and provide any additional guaranties of its obligations under the franchise agreement as City Wide may require. This ensures that the transferee is fully committed to the obligations and responsibilities of the franchise.
This requirement protects City Wide by ensuring that the new franchisee (transferee) is financially and legally accountable. It aligns the transferee's interests with those of the franchisor, promoting consistent brand standards and operational practices. The transferee will need to meet City Wide's then-current criteria for operating a franchised business, including qualification and training requirements.
For a prospective franchisee, this means that if they plan to transfer their City Wide franchise in the future, the potential buyer will need to be prepared to meet these conditions. This could include providing personal guarantees or other forms of security to ensure they can fulfill the financial and operational obligations of the franchise agreement. This requirement is not uncommon in franchising, as franchisors seek to maintain the stability and performance of their franchise network.