Does the personal guarantee for the Noodles & Company Franchise Agreement extend beyond the term of the agreement?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
FOR THE SITE LOCATED AT: In consideration of, and as an inducement to, the execution of the Noodles & Company Franchise Agreement dated as of , (the "Agreement") by and between Noodles & Company ("Franchisor"), and ("Franchisee"), each of amendments). the undersigned owners of a 10% or greater interest in Franchisee hereby personally, unconditionally and irrevocably: (1) guarantees to Franchisor and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that Franchisee shall timely perform each and every undertaking, agreement and covenant set forth in the Agreement (and any amendments), including the timely performance of all financial obligations, and that each and every representation of Franchisee made in connection with the Agreement (and any amendments) are true, correct and complete in all respects at and as of the time given; and (2) agrees personally to be bound by, and personally liable for the breach of, each and every provision in the Agreement (and any Notwithstanding the foregoing, the undersigned shall have no obligation under Section 7.02 or 7.03 of the Franchise Agreement after the second anniversary of the later of (a) the date of the undersigned ceases to have an ownership interest in Franchisee or (b) the date of undersigned ceases to render services to the Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 98–99)
What This Means (2025 FDD)
According to the 2025 Noodles & Company Franchise Disclosure Document, the personal guarantee provided by principal owners extends beyond the term of the Franchise Agreement. Specifically, owners with a 10% or greater interest in the franchisee personally, unconditionally, and irrevocably guarantee the franchisee's timely performance of all obligations and the truthfulness of all representations made in connection with the agreement. This guarantee applies 'for the term of the Agreement and thereafter as provided in the Agreement'.
This means that a franchisee's personal liability for the Noodles & Company franchise can continue even after the initial franchise term expires, if the Franchise Agreement stipulates such continuation. This is a significant consideration for potential franchisees, as it ties their personal assets to the performance of the franchise beyond the active operating period. Franchisees should carefully review the specific conditions under which the guarantee extends beyond the term, as outlined in the agreement.
However, the personal guarantee does have some limitations. The undersigned owners have no obligation under Section 7.02 or 7.03 of the Franchise Agreement after the second anniversary of the later of (a) the date the undersigned ceases to have an ownership interest in Franchisee or (b) the date the undersigned ceases to render services to the Franchisee. This provides some relief to owners who may leave the business or sell their ownership stake, limiting their exposure after a certain period. Prospective franchisees should consult with legal counsel to fully understand the implications and duration of their personal guarantee within the Noodles & Company franchise agreement.