What must equity holders of the assignee entity who have not signed the Exit Franchise Agreement execute?

According to Exit's 2025 Franchise Disclosure Document, if a franchisee wishes to operate as a corporation, partnership, or limited liability company, and the Exit subfranchisor consents to the assignment of the franchise agreement to that entity, there are specific requirements. One key condition is that all equity holders of the assignee entity who have not signed the original Exit Franchise Agreement must execute a Personal Guaranty. This guaranty is in the form attached as Schedule 4 in the FDD.

This requirement means that individuals with an ownership stake in the franchisee's business entity, but who were not original signatories to the franchise agreement, must personally guarantee the entity's obligations under the agreement. This is a common practice in franchising to ensure that the franchisor has recourse to individual assets if the business entity fails to meet its financial or contractual obligations. The Personal Guaranty essentially extends the liability for the franchise's performance beyond the business entity to the individual equity holders.

For a prospective Exit franchisee, this condition highlights the importance of understanding the full scope of personal liability involved in the franchise. It also underscores the need to carefully consider who the equity holders are in the business entity and ensure they are willing to execute the Personal Guaranty. This requirement could impact the structure of the franchisee's business and the involvement of various individuals in the franchise operation. Franchisees should review Schedule 4 to fully understand the obligations created by the Personal Guaranty.