Is a guaranty required from all shareholders of the transferee in a Counselor Realty franchise transfer?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
and in accordance with, the second to last sentence of Section 9.1). We may specifically withhold consent if: (i) you do not pay all amounts you owe to Counselor or its affiliates or to your suppliers; (ii) you (or the transferee) do not complete the repair, maintenance or upgrade of the Business' facility, fixtures, equipment, and signage to then-current System standards; or (iii) all shareholders or owners of the transferee do not execute the guaranty of the new Agreement.
- 9.3 Franchisee Death or Disability. Your death, disability or incapacity (or of a principal officer, director or partner of Franchisee) is also a "transfer." Your executor, heir or legal representative (or the corporation or partnership, if an entity) must apply within 60 days of the death or incapacity for our consent to transfer this Agreement and satisfy the other conditions above.
- 9.4 Transfer by Franchisor. We may transfer our interest in this Agreement at our discretion.
- 9.5 Relocation. You may relocate with the prior written consent of Counselor, to a suitable site within the Territory. The replacement Office must open within 120 days after the prior facility closes. The replacement Office must comply with the requirements of this Agreement and then-current System standards.
9.6 Right of First Refusal.
Source: Item 22 — CONTRACTS (FDD page 32)
What This Means (2025 FDD)
According to the 2025 Counselor Realty Franchise Disclosure Document, a guaranty from all shareholders or owners of the transferee may be required for a franchise transfer. Specifically, Counselor Realty may withhold consent for a transfer if all shareholders or owners of the entity acquiring the franchise do not execute a guaranty of the new franchise agreement. This condition applies to transfers where the franchisee is a corporation, partnership, or other entity.
This requirement ensures that all individuals with an ownership stake in the franchisee entity are personally liable for the obligations under the Franchise Agreement. This provides Counselor Realty with an additional layer of security, as they can pursue the personal assets of the shareholders or owners if the franchisee entity fails to meet its financial or contractual obligations.
However, there is an exception where Counselor Realty's consent is not required for a transfer of ownership interest if the transfer does not result in a change of control, the franchisee provides written notice at least 30 days prior to the transfer, and the transferee executes the guaranty attached to the agreement within 10 days of the transfer. This exception suggests that in certain circumstances, a guaranty may still be required even when Counselor Realty's consent for the transfer is not mandated.
Prospective franchisees should carefully review the transfer provisions in the Franchise Agreement and consult with legal counsel to understand the implications of the guaranty requirement. They should also inquire with Counselor Realty about the specific circumstances under which a guaranty will be required from all shareholders or owners of the transferee entity.