What is the significance of the franchisee acknowledging that the agreement personally obligates them to guarantee Franchisee's obligations to Mrcool?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
- (4) The transferee shall be bound by all terms and conditions of this Agreement, and each owner of the transferee and their respective spouses shall personally execute the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.
Each owner of the transferee shall also be required to execute such further agreements designated by Franchisor whereby the proposed transferee assumes each and every obligation and responsibility of Franchisee as set forth in this Agreement;
(5) All obligations of Franchisee under this Agreement and the Ancillary Agreements shall be assumed by the transferee, each individual owner of transferee, and their respective spouses in a manner satisfactory to Franchisor;
(6) Franchisee, each Owner, and each Spouse must execute the General Release attached to this Agreement as Exhibit 8 releasing Franchisor, Franchisor's affiliates and Franchisor's past and present officers, directors, shareholders, members, partners, agents, representatives, independent contractors, servants and employees, of any and all claims against Franchisor for matters arising on, or before, the effective date of the Transfer;
(7) If the proposed Transfer includes or entails the Transfer of this Agreement, substantially all of the assets of the Franchised Business, a controlling interest in Franchisee, or is one of a series of Transfers which in the aggregate Transfers substantially all of the assets of the Franchised Business or a controlling interest in Franchisee, then, at the election of Franchisor and upon notice from Franchisor to Franchisee, the transferee may be required to execute (and/or, upon Franchisee's request, shall cause all interested parties to execute) for a term ending on the expiration date of the original Term of this Agreement, the then current standard form Franchise Agreement offered to new franchisees of MRCOOL Centers and any other agreements as Franchisor requires.
Such agreements shall supersede this Agreement and its associated agreement in all respects, and the terms of Franchisor's then current agreements may differ from the terms in this Agreement, provided that such agreements shall provide for the same Royalty Fee, Advertising Contributions, and all other financial or monetary obligations established in this Agreement;
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
Based on the 2025 Mrcool Franchise Disclosure Document, when transferring a franchise, the franchisee acknowledges they may be personally obligated to guarantee the franchisee's obligations to Mrcool. Specifically, if the proposed transfer includes the transfer of the agreement, substantially all of the assets of the franchised business, a controlling interest in the franchisee, or is one of a series of transfers that in the aggregate transfers substantially all of the assets of the franchised business or a controlling interest in the franchisee, then Mrcool can require the transferee to execute the Franchise Owner and Spouse Agreement and Guaranty. This agreement would be for a term ending on the expiration date of the original term of the agreement.
This means that the new franchisee (transferee) must agree to all the terms and conditions of the original franchise agreement. Each owner of the transferee, along with their spouses, must personally execute the Franchise Owner and Spouse Agreement and Guaranty. This ensures that Mrcool has recourse to the personal assets of the new owners if the franchise fails to meet its financial or operational obligations. Mrcool also requires each owner of the transferee to execute further agreements assuming every obligation and responsibility of the franchisee as set forth in the agreement.
Furthermore, the franchisee, each owner, and each spouse must execute a General Release releasing Mrcool and its affiliates from any claims against Mrcool for matters arising on or before the effective date of the transfer. The new agreements will supersede the original agreement and associated agreements in all respects, and the terms of Mrcool's then-current agreements may differ from the terms in the original agreement, provided that such agreements provide for the same Royalty Fee, Advertising Contributions, and all other financial or monetary obligations established in the original agreement. This protects Mrcool from potential liabilities related to the previous franchisee's actions and ensures a clean break.
For a prospective Mrcool franchisee, this highlights the importance of understanding all obligations before transferring the franchise. It also emphasizes the need for any potential transferee to be fully aware of the financial and operational commitments they are undertaking, as they will be personally liable for the franchise's performance. This requirement is not uncommon in franchising, as franchisors seek to protect their brand and ensure the continued success of the franchise system.