If the Pump It Up franchisee is an entity, what exhibit outlines the ownership interests?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) If you are a corporation, a limited liability company or a partnership (any of which, an "Entity"), you make the following representations and warranties: (a) you are duly organized and validly existing under the laws of the state of formation; (b) you are qualified to do business in the state, county, and city in which the Franchised Business is located; (c) execution of this Agreement and the development and operation of the Franchised Business is permitted by your governing documents; (d) unless waived in writing by us, your Articles of Incorporation, Articles of Organization or written partnership agreement must at all times provide that your activities are limited exclusively to the development and operation of Pump It Up Businesses and other businesses operated by you that are franchised by us or our affiliates; (e) all interests in you are owned as set forth in attached Exhibit 4; and (f) each person owning 5% interest in you, along with their spouse, has executed a guaranty agreement, set forth in attached Exhibit 5, undertaking to be bound by the provisions of the Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, if the franchisee is a corporation, limited liability company, or partnership (collectively referred to as an "Entity"), the ownership interests are detailed in attached Exhibit 4. The FDD states that all interests in the entity must be owned as set forth in Exhibit 4. Additionally, each person owning 5% interest in the entity, along with their spouse, must execute a guaranty agreement, which is outlined in attached Exhibit 5.
This requirement ensures that Pump It Up has a clear understanding of the ownership structure of its franchisees, especially when the franchisee is not an individual. By requiring a listing of ownership interests in Exhibit 4, Pump It Up aims to maintain transparency and accountability within its franchise system.
The stipulation that individuals owning 5% or more of the entity, along with their spouses, must sign a guaranty agreement (Exhibit 5) is a risk mitigation measure for Pump It Up. This agreement makes these individuals personally liable for the franchisee's obligations under the Franchise Agreement, providing an additional layer of security for the franchisor. This is a common practice in franchising to ensure that the franchisor can seek recourse from individual owners in case of default or breach of contract by the franchisee entity.