How effective are Personal Guarantees in Franchise Agreements?
Insights FranchisingA guarantee is a contractual promise to pay the liabilities of another.
When a franchise agreement is entered into between a franchisor and a corporate franchisee, such as a limited company, it is usual for the franchisor to require at least one individual, such as a company director or key shareholder, to provide a personal guarantee that they will satisfy the obligations and liabilities of the franchisee, in the event that the franchisee fails to meet those obligations and liabilities under the franchise agreement.