If a Lees Famous Recipe franchisee is a business entity, what must the Principal Owners execute?

According to the 2025 Lees Famous Recipe FDD, if the franchisee is a business entity, each Principal Owner must execute a personal guaranty. A Principal Owner is defined as any person or entity who directly or indirectly owns a five percent (5%) or greater interest in the franchisee. If the Principal Owner is a corporation or other entity besides a partnership, a Principal Owner also includes any shareholder or owner with a five percent (5%) or greater interest in that corporation or entity. If the Principal Owner is a partnership, it includes each general partner and any owner with a five percent (5%) or greater interest in a general partner that is an entity.

This requirement ensures that Lees Famous Recipe has recourse to the personal assets of the individuals who control the franchisee entity, providing an additional layer of security for Lees Famous Recipe. This is a common practice in franchising, as it aligns the interests of the individuals with the success of the franchise and holds them accountable for the franchisee's obligations under the franchise agreement.

Prospective franchisees should carefully consider the implications of providing a personal guaranty, as it puts their personal assets at risk if the franchise fails to meet its financial obligations. Franchisees should consult with legal and financial advisors to fully understand the risks and obligations associated with the personal guaranty before signing the franchise agreement.