What form does the guarantee from owners of the Cream franchisee entity take?
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 a corporation, limited liability company, or partnership (referred to as an "Entity"), each owner with a 10% or greater ownership interest must execute a guarantee. This guarantee is in the form prescribed by Cream. The owners undertake to be personally bound, jointly and severally, by all provisions of the Franchise Agreement and any ancillary agreements between the franchisee and Cream. The current form of guarantee is included as Attachment D to the Franchise Agreement.
This requirement ensures that Cream has recourse to the personal assets of the owners of the franchisee entity, providing an additional layer of security for Cream in case the franchisee entity fails to meet its obligations. This is a common practice in franchising, as it aligns the interests of the owners with the success of the franchise and encourages them to actively manage and support the business.
Furthermore, the franchisee is required to keep Attachment A to the Franchise Agreement updated to accurately reflect all owners and their interests. Any changes to ownership must be reflected in a revised Attachment A, signed and delivered to Cream. This allows Cream to maintain accurate records of the ownership structure of its franchisees and ensure that all owners with a significant stake in the business are bound by the guarantee. This also allows Cream to track who is responsible for the franchise's obligations.
Prospective Cream franchisees should carefully review Attachment D, the current form of guarantee, to fully understand the extent of their personal liability. They should also be aware of the ongoing requirement to update Attachment A to reflect any changes in ownership and ensure that all owners with a 10% or greater interest execute the guarantee.