Under what conditions will Southern Steer require a Personal Guaranty?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
.g., president) it must be made clear that such person holds that position with Franchisee's entity and not with Franchisor.
- (e) Management. Franchisee is prohibited from transferring, delegating, assigning or subcontracting Franchisee's obligations under this Agreement or the operation of Franchisee's Southern Steer Business to any third party or entity without Franchisor's prior approval.
- (f) Guaranty. If Franchisee is a corporation, partnership, limited liability company, or other entity, or in the future become a corporation, partnership, limited liability company, or other entity, Franchisor will require Franchisee's officers, directors, shareholders, partners, members, managers, owners, and owner's spouses or domestic partners to sign the Personal Guaranty attached hereto as Attachment C.
- (g) Security Interest in Franchise Agreement. This Agreement and the Southern Steer Business granted to the Franchisee hereunder may not be used by the Franchisee as collateral or be the subject of a security interest, lien, levy, attachment or execution by the Franchisee's creditors, any financial institution, or any other party, except with the prior written approval of the Franchisor.
- 9.6. Enforcement.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, if the franchisee is a corporation, partnership, limited liability company, or other entity, or becomes one in the future, Southern Steer will require the franchisee's officers, directors, shareholders, partners, members, managers, owners, and the owner's spouses or domestic partners to sign a Personal Guaranty. This guaranty is included as Attachment C to the FDD.
Additionally, each of the franchisee's owners must execute the Personal Guaranty, as well as a Non-competition and Non-Disclosure Agreement, which is included as Attachment I-1 to the FDD. If any person or entity ceases to be one of the franchisee's owners, or if any individual or entity becomes an owner of the franchisee, the franchisee must notify Southern Steer in writing. Within five business days, the franchisee must ensure that the new owner executes all documents required by Southern Steer, including the Personal Guaranty.
Furthermore, if the franchisee transfers the franchise agreement to a new entity, the transferee and all of the transferee's owners must execute the agreements required by Southern Steer to document the transfer, including the Personal Guaranty. This ensures that Southern Steer has recourse to the personal assets of the individuals controlling the franchise, providing an additional layer of security for Southern Steer in case of financial or operational issues with the franchise.
Personal guarantees are a common practice in franchising, especially when the franchisee is a business entity rather than an individual. This requirement helps to ensure that the franchisor has recourse beyond the business assets of the franchisee, aligning the personal interests of the owners with the success of the franchise. Prospective franchisees should carefully review the Personal Guaranty to understand the full extent of their obligations and potential liabilities.