Must the transferee's shareholders or partners guarantee the obligations in the transfer agreement for a Crave franchise?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
- (e) The transferee shall enter into a written agreement, in a form reasonably satisfactory to us, assuming full, unconditional, joint and several liability for, and agreeing to perform from the date of the transfer, all obligations, covenants and agreements contained in this Agreement; and, if transferee is a corporation or a partnership, transferee's shareholders, partners or other investors, as applicable, shall execute such agreement as transferee's principals and guarantee the performance of all such obligations, covenants and agreements;
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, if the transferee of a Crave franchise is a corporation or partnership, the transferee's shareholders or partners must execute an agreement as principals, guaranteeing the performance of all obligations, covenants, and agreements within the franchise agreement. This requirement ensures that individuals with a vested interest in the transferee entity are personally liable for upholding the franchise agreement terms.
This provision is designed to provide Crave with additional security and recourse in the event of non-compliance or default by the transferee. By requiring personal guarantees from shareholders or partners, Crave aims to mitigate the risk associated with transferring the franchise to a corporate or partnership entity. This is a fairly standard practice in franchising, as it ensures that there are individuals who are directly accountable for the performance of the franchise, rather than just the business entity itself.
For a prospective Crave franchisee, this means that if they plan to transfer their franchise to a corporation or partnership, they must ensure that the shareholders or partners are willing to provide these personal guarantees. This requirement could impact the attractiveness of the transfer to potential transferees, as it places additional personal liability on the shareholders or partners. Franchisees should carefully consider this when structuring any potential transfer of their Crave franchise.