Who is required to sign the Guaranty Agreement for 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 FDD, if an individual franchisee assigns the Franchise Agreement to a corporation or limited liability company they wholly own, both the franchisee and all Principal Owners of the assignee entity are required to sign the Guaranty Agreement. This agreement is included as Exhibit D to the Franchise Agreement.
This requirement ensures that Lees Famous Recipe has recourse to the personal assets of both the original franchisee and the Principal Owners of the new business entity. This protects Lees Famous Recipe in case the new entity fails to meet its financial obligations under the Franchise Agreement. The franchisor wants to ensure that the individuals who ultimately benefit from the franchise are personally liable for its performance.
For a prospective franchisee, this means that incorporating their Lees Famous Recipe business will not shield them or their Principal Owners from personal liability. They should carefully review Exhibit D, the Guaranty Agreement, to understand the full extent of their obligations before signing the Franchise Agreement. It is also important to note that the corporation or limited liability company can conduct no business other than the Restaurant (or other Lee's Famous Recipe Restaurants under franchise agreements with them).