Is a continuing personal guarantee required from the individual when transferring a Floyds 99 franchise to a controlled corporation?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchisee acknowledges that the Franchisor's right to approve or disapprove of a proposed sale or transfer, and all other requirements and rights related to such proposed sale or transfer, as provided for above, shall apply (1) if the Franchisee is a partnership or other business association, to the addition or deletion of a partner or members of the association or the transfer of any partnership or membership among existing partners or members; (2) if the Franchisee is a corporation or limited liability company, to any proposed transfer or assignment of 25% or more of the ownership interests of the Franchisee, whether such transfer occurs in a single transaction or several transactions; and (3) if the Franchisee is an individual, to the transfer from such individual or individuals to a corporation or limited liability company controlled by them, in which case the Franchisor's approval will be conditioned upon: (i) the continuing personal guarantee of the individual (or individuals) for the performance of obligations under this Agreement; (ii) the issuance and/or transfer of ownership interests which would affect a change in ownership of 25% or more of the stock or membership units in the company being conditioned on the Franchisor's prior written approval; (iii) a limitation on the company's business activity to that of operating the FLOYD'S 99 Shop and related activities; and (iv) other reasonable conditions.
With respect to a proposed transfer as described in subsection (1) and (3) of this Section, the Franchisor's right of first refusal to purchase, as set forth above, shall not apply and the Franchisor will waive any transfer fee chargeable to the Franchisee for a transfer under these circumstances.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, if a franchisee who is an individual transfers their franchise to a corporation or limited liability company that they control, Floyds 99 will require a continuing personal guarantee. This means that even after the transfer, the individual franchisee remains personally liable for the performance of all obligations under the Franchise Agreement.
Floyds 99 approval of the transfer is conditional upon this guarantee. In addition, the issuance or transfer of ownership interests that would affect a change in ownership of 25% or more of the stock or membership units in the company is conditioned on Floyds 99's prior written approval. The company's business activity must also be limited to operating the Floyds 99 shop and related activities. Floyds 99 may also impose other reasonable conditions.
This requirement protects Floyds 99 by ensuring that the original franchisee remains committed to the success of the franchise and is held accountable for any failures or breaches of the agreement, even after the business is operated through a corporate entity. However, the franchisor will waive any transfer fee chargeable to the Franchisee for a transfer under these circumstances.
Franchisors often require personal guarantees to ensure franchisees are fully invested in the business's success. This is especially common when transferring ownership to a corporate entity, as it provides an additional layer of security for the franchisor. Prospective franchisees should carefully consider the implications of a personal guarantee and ensure they are comfortable with the associated risks before proceeding with the transfer.