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Before Signing the Franchise Agreement Understand the Personal Guaranty
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 One of the most important provisions in a franchise agreement is the personal guaranty. If you're a prospective franchisee that's performing due diligence on a particular franchise always keep this factor in mind. Once an individual signs the personal guaranty which is part of the process when executing a franchise agreement, they become responsible for and guarantee all contractual commitments, including the financial obligations, made by the corporate entity owning and operating the franchise.

A personal guaranty provides the franchisor, with additional security in the form of the assets of the guarantor, the franchisee. Otherwise, the franchisor could be chasing corporate entities with virtually no assets. This provision in the franchise agreement enables the franchisor to immediately proceed against the individual guarantor (franchisee) rather than the corporation operating the franchise. This is because the individual franchisee is usually required to waive the right to require the franchisor to proceed first against the franchisee's corporate entity. In some cases a franchisor may agree to limit the personal guarantee to a finite dollar amount. In any case, before signing a franchise agreement consider the obligation you'll be assuming so be sure you're making the right choice. 

Posted on December 13, 2015 at 5:56 PM
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