What form does the guarantee need to be in for owners of a Cream franchisee Entity?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree and represent that Attachment A to this Agreement completely and accurately describes all of your owners and their interests in you as of the Effective Date. Each of your owners with a 10% or greater ownership interest in your Entity must execute a guarantee in the form we prescribe undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between you and us. Our current form of guarantee is attached herein as Attachment D. Subject to our rights and your obligations under Section 12, you and your owners agree to sign and deliver to us revised Attachment A to reflect any permitted changes in the information that Attachment A now contains.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, if a Cream franchisee is an entity such as a corporation, LLC, or partnership, any owner with a 10% or greater ownership interest must execute a personal guarantee. This guarantee must be in the form prescribed by Cream. The owners agree to be bound, jointly and severally, by all provisions of the Franchise Agreement and any ancillary agreements between the franchisee entity and Cream. Attachment D to the Franchise Agreement contains Cream's current form of guarantee.
This requirement ensures that Cream has recourse to the personal assets of the owners should the franchisee entity fail to meet its obligations under the Franchise Agreement. The joint and several liability means that each owner is individually liable for the entire debt or obligation, not just a portion of it. Cream can pursue any one or all of the owners for the full amount owed.
Cream also requires that Attachment A to the Franchise Agreement accurately describes all of the entity's owners and their interests as of the effective date. Further, the franchisee and its owners must update and deliver a revised Attachment A to Cream to reflect any permitted changes to the ownership information. This ensures Cream has current information about the ownership structure of its franchisees.
For a prospective Cream franchisee, this means that if you own 10% or more of the franchise through a business entity, you will have to personally guarantee the franchise obligations. You should carefully review Attachment D, the current form of guarantee, to understand the full extent of your personal liability.