Is Learningrx liable for a franchisee's obligations to third parties?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of, and as inducement to, the execution of that certain Franchise Agreement of even date herewith (the "Agreement") by LearningRx Franchise Corporation (the "Franchisor") and the party or parties identified on the Agreement (the "Franchisee"), and acknowledging that Franchisor would not be willing to enter into the Agreement without the commitment of each spouse or domestic partner of Franchisee's owner to guarantee the performance of the Franchisee, each of the undersigned hereby personally and unconditionally (a) guarantees to Franchisor, and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that the Franchisee shall punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement; and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities. Notwithstanding clauses (a) and (b) above, a spouse or domestic partner who is also a guarantor hereunder and who becomes widowed and who does not have (and will not obtain) an ownership interest in the Franchisee, the Agreement, or any Franchise Agreement granted thereunder as an owner, co-owner, investor, member, partner, shareholder or like capacity shall not thereafter be held responsible for any monetary obligations thereafter arising out of the terms and conditions of this Guaranty and Assumption of Obligations unless any such ownership interest is acquired in any manner by the widowed spouse or domestic partner, or the widowed spouse's children, deceased spouse's children, or domestic partner's children. Notwithstanding any change in ownership resulting from the death of a spouse or domestic partner, all monetary obligations and liabilities existing at the time of death shall continue to be an obligation of the surviving spouse or domestic partner until such obligations or liabilities shall be paid in full by the estate or by the guarantor spouse or domestic partner. Notwithstanding the limitations set forth above, any and all other non-monetary obligations of the Agreement shall remain an obligation of the surviving spouse.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
Based on the 2025 Learningrx Franchise Disclosure Document, the provided excerpts do not explicitly state whether Learningrx is liable for a franchisee's obligations to third parties. However, the FDD does include a receipt that addresses the obligations of a franchisee's spouse or domestic partner, as well as the franchisee's obligations to Learningrx. This receipt outlines that the spouse or domestic partner guarantees the franchisee's performance under the Franchise Agreement.
Additionally, the FDD states that the franchisee acknowledges they have conducted an independent investigation of the Learningrx system and recognizes the business involves risk and depends on their ability as an independent business person. The franchisee also acknowledges they are not subject to agreements that might conflict with the terms of the Franchise Agreement. This suggests that Learningrx aims to ensure franchisees are aware of their responsibilities and potential liabilities.
To fully understand Learningrx's liability regarding a franchisee's obligations to third parties, a prospective franchisee should review the complete Franchise Agreement and consult with a legal professional. Specifically, they should look for clauses addressing indemnification, guarantees, and the overall relationship between Learningrx, the franchisee, and third-party vendors or customers. It is important to determine under what circumstances Learningrx might be held responsible for the franchisee's actions or debts.