If the Cream franchisee is a business entity, what obligation do the owners have?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, partnership, limited liability company, or other business entity, your owners will have to guarantee your obligations and be bound by the provisions of the Franchise Agreement (as defined below) and Area Development Agreement (as defined below), and other agreements as described in this Disclosure Document.
Source: Item 1 — THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES (FDD pages 8–10)
What This Means (2025 FDD)
According to the 2025 FDD, if a Cream franchisee is a business entity such as a corporation, partnership, or limited liability company, the owners of that entity must guarantee the obligations of the franchisee. This means the owners are personally responsible for ensuring the business meets all requirements outlined in the Franchise Agreement and Area Development Agreement. They are also bound by the provisions of these agreements.
This requirement is a common practice in franchising, as it provides Cream with an additional layer of security. By having the owners personally guarantee the obligations, Cream can ensure that there are individuals with a vested interest in the success and compliance of the franchise. This personal guarantee can help to mitigate the risk of the business entity failing to meet its obligations under the agreements.
For a prospective Cream franchisee, this means that even if you form a business entity to operate the franchise, you cannot completely shield yourself from personal liability. You should carefully review the Franchise Agreement and Area Development Agreement to understand the full extent of the obligations you will be guaranteeing. It is advisable to seek legal counsel to fully understand the implications of providing a personal guarantee before signing any agreements.