Under the Stretch Zone Guaranty, is the Guarantor's liability joint, several, or both?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Guaranty. If you are a Business Entity, each Franchise Owner holding a direct or indirect interest of 20% or more in you will execute an agreement, in the form that we designate, undertaking to be personally bound, jointly and severally with such other guaranteeing Franchise Owners, by all provisions of this Agreement and any and all related agreements (a "Guaranty"), the current version of which is attached as Exhibit G to the FDD. In addition, at our request, the spouse of each such guaranteeing Franchise Owner (as applicable) will execute the Guaranty.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone FDD, if a franchisee is a business entity, each franchise owner holding a direct or indirect interest of 20% or more must execute a Guaranty. This agreement ensures that the franchise owners are personally bound, jointly and severally, with other guaranteeing franchise owners, by all provisions of the Franchise Agreement and any related agreements. The current version of this Guaranty is included as Exhibit G to the FDD. Additionally, Stretch Zone may request that the spouse of each guaranteeing franchise owner also execute the Guaranty.
This means that each guarantor is individually liable for the full amount of the obligations, as well as being jointly liable with the other guarantors. Stretch Zone can pursue any one or all of the guarantors for the full amount owed, regardless of the involvement or responsibility of the other guarantors. This provides Stretch Zone with a strong level of protection, as they have multiple parties who are fully responsible for the franchisee's obligations.
For a prospective Stretch Zone franchisee, this has significant implications. If you own 20% or more of a business entity that is a franchisee, you will be required to sign a personal guaranty, making you personally liable for the debts and obligations of the franchise. Your spouse may also be required to sign the guaranty. It is crucial to carefully review the Guaranty (Exhibit G) and understand the full extent of your obligations before signing the Franchise Agreement. You should seek legal counsel to fully understand the risks involved.