Is the continued validity of the Cool Binz franchise agreement dependent on the ongoing validity of the personal guaranty?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
- b All general partners, members and all direct and indirect holders of equity interest shall, upon the legal entity's execution of this Agreement, execute an agreement personally guaranteeing to us the full payment and performance of the legal entity's obligations to us and undertaking to be bound, individually, jointly and severally, by all the terms of this Agreement including, without limitation, the restrictions on assignment contained herein.
The personal guaranty shall be in the form attached hereto as Exhibit D or in such other form as we may from time to time prescribe.
- c.
The legal entity shall not use the name "COOL BINZ" or any other Mark, or any name deceptively similar thereto, except to reflect its franchise relationship with us.
Neither the legal entity nor any of its owners may issue or sell, or offer to issue or sell, any securities of the legal entity or an affiliate of the legal entity, regardless of whether such sale or offer would be required to be registered pursuant to the provisions of the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction, without obtaining our prior written consent, which is in our sole discretion, and complying with all of our requirements and restrictions concerning use of information about us.
- d.
The legal entity shall furnish us, at the time of execution of this Agreement and upon all transfers subject to the provisions of this Section 10, a list of all stockholders, members, managers and partners having an interest in the legal entity, their respective percentage interests and the number of shares directly and indirectly owned or controlled by each.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to the 2025 Cool Binz Franchise Disclosure Document, if the franchisee is a legal entity such as a partnership, LLC, or corporation, all general partners, members, and direct/indirect equity holders must execute an agreement personally guaranteeing the legal entity's obligations to Cool Binz. This guaranty ensures the full payment and performance of the entity's duties under the franchise agreement. The personal guaranty has to be in the form attached as Exhibit D to the FDD or another form that Cool Binz prescribes from time to time.
This requirement means that the franchisor, Cool Binz, seeks to have individuals stand behind the financial and operational commitments of the franchise, especially when the franchise is owned by a business entity. This is a common practice in franchising, as it provides an additional layer of security for the franchisor. The personal guaranty makes the individuals liable in case the business entity fails to meet its obligations.
Furthermore, the FDD states that the organizational documents of the legal entity must restrict the issuance and transfer of any interest in the entity, aligning with the terms of the franchise agreement. Cool Binz also requires copies of these documents and resolutions authorizing the entity's entry into the agreement. This ensures that Cool Binz maintains control over who is involved in the franchise and that all parties are aware of and bound by the franchise agreement's terms. The franchisee must also furnish a list of all equity holders with their respective percentage interests.