Under the Stretch Zone Guaranty, how is the Guaranty deemed to be drafted?
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 the franchisee is a business entity, each franchise owner holding a direct or indirect interest of 20% or more must execute a guaranty. This agreement, in a form designated by Stretch Zone, ensures that the franchise owner is 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 attached as Exhibit G to the FDD.
Furthermore, at Stretch Zone's request, the spouse of each guaranteeing franchise owner may also be required to execute the Guaranty. This ensures that Stretch Zone has additional security and recourse in case of any default or breach of the Franchise Agreement by the franchisee.
In practical terms, this means that prospective Stretch Zone franchisees who operate their business through a business entity should be aware that they, and potentially their spouses, will need to sign a personal guaranty. This guaranty makes them personally liable for the obligations of the franchise, which is a common practice in franchising to ensure the franchisee's commitment and financial responsibility.