What is the purpose of Exhibit D, the Guaranty and Assumption of Obligations, in relation to a Lees Famous Recipe franchise?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
You (as an individual) may assign this Agreement to a corporation or a limited liability company that conducts no business other than the Restaurant (or other Lee's Famous Recipe Restaurants under franchise agreements with us), provided: (1) the Restaurant is actively managed by you or an operating manager approved by us; (2) you own one hundred percent (100%) of the ownership interest in the corporation or limited liability company; (3) you and all Principal Owners of the assignee entity sign the Guaranty attached hereto as Exhibit D; (4) you provide us thirty (30) days' written notice before the proposed date of assignment of this Agreement to the corporation or limited liability company; and (5) you provide us a certified copy of the articles of incorporation, operation agreement, organizational documents, and a list of all shareholders or members having beneficial ownership, reflecting their respective interest in the assignee entity.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
According to the 2025 Lees Famous Recipe Franchise Disclosure Document, Exhibit D, the Guaranty and Assumption of Obligations, is a document that must be signed by the franchisee and all Principal Owners of the assignee entity when the franchisee (as an individual) assigns the Franchise Agreement to a corporation or limited liability company. This ensures that the obligations under the Franchise Agreement are guaranteed by the individual franchisee and their Principal Owners, even after the agreement is assigned to a business entity.
This requirement is triggered when the franchisee wants to operate the Lees Famous Recipe restaurant through a corporation or LLC, rather than as an individual. To do so, the franchisee must own 100% of the corporation or LLC. The restaurant must also be actively managed by the franchisee or an operating manager approved by Lees Famous Recipe.
By signing the Guaranty, the franchisee and Principal Owners agree to be held personally liable for the performance of the franchise agreement, even though the restaurant is operated through a separate legal entity. This is a common practice in franchising, as it provides the franchisor with additional security and recourse in case of default or breach of contract. The franchisee must provide Lees Famous Recipe with 30 days' written notice before assigning the agreement and provide certified copies of the business's organizational documents.