In the Cool Binz franchise agreement, what is the significance of the personal guaranty?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
nt. Copies of such documents and of resolutions of the legal entity's board of directors or managers authorizing its entry into this Agreement shall be furnished to us upon request.
- 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.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, the personal guaranty is a critical component of the franchise agreement, particularly when the franchisee is a legal entity such as a corporation, LLC, or partnership. The personal guaranty ensures that all general partners, members, and direct or indirect equity holders of the legal entity personally guarantee the full payment and performance of the entity's obligations to Cool Binz. This means that these individuals are individually, jointly, and severally bound by all terms of the Franchise Agreement. This includes, without limitation, the restrictions on assignment. The personal guaranty must be in the form attached as Exhibit D to the Franchise Agreement or in another form prescribed by Cool Binz from time to time.
This requirement has significant implications for prospective Cool Binz franchisees who choose to operate under a legal entity structure. It means that even though the business is owned by a corporation or LLC, the individuals behind the entity are still personally liable for the franchise's financial and operational obligations. This is a common practice in franchising, as it provides the franchisor with an additional layer of security and ensures that the individuals with a vested interest in the business are fully committed to its success. Spouses of shareholders, general partners, and members/managers may also be required to execute the guaranty.
Furthermore, the personal guaranty extends to situations involving the transfer of the franchise. If a franchisee finances any part of the sale price, they must assure that the transferee's obligations are subordinate to the transferee's obligation to pay royalties, brand marketing fees, and other amounts due to Cool Binz. The franchisee must also reaffirm their guaranty of the Franchise Agreement in a comfort letter. This ensures that even if the franchise is sold, the original franchisee remains liable for the financial obligations to Cool Binz until the final closing of the installment sale or final payment of such structured payment arrangement.
In the event of a breach of the non-competition provisions outlined in the agreement, the time limitation of these provisions will be tolled during any default under the Personal Guaranty. This means that the period during which the franchisee is restricted from competing with Cool Binz can be extended if they default on their obligations under the guaranty. This provision underscores the importance of adhering to the terms of the Franchise Agreement and the personal guaranty to avoid potential legal and financial repercussions.