Does anyone has expirience negotiating PGs inside FDD for franchise resale?

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October 23, 2023

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Denver, CO, USA

Acquiring multi-unit franchise resales is becoming increasingly popular in the ETA space. Most franchisors require personal guarantees from franchisees under the FDD (Franchise Disclosure Document). Does anyone have experience with this topic? How can ETA investors avoid being hooked on these FDD's personal guarantees?

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Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA
Agree - you can always ask but very unlikely to get it. Once you've signed, the franchisor is giving up the opportunity to give that territory to someone else, and the risk of having a dud territory is bad for them for a long time (and not just financially on that territory's lost royalties, it can hurt them in other franchisee due diligence, financial disclosures, having to report a closure on the FDD, etc. which greatly harms the ability of the system to grow) They want to make sure franchisees are highly motivated to make their territories do well and a PG is part of that equation.
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Reply by a searcher
from The University of Texas at Austin in Chicago, IL, USA
^redacted‌ thanks for the tag. Unfortunately, I did not end up moving forward with any of the franchises I was looking at. For one it was FDD related, inability to budge on a key term and general ROI/payback. The other was somewhat similar and some of the other requirements that we felt impeded on our personal life, somewhat. Happy to connect but I found my conversation with ^redacted‌ very helpful - he's a well of knowledge!
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