Personal guaranty and franchise termination: what the sources say
Only one federal point is sourced: Item 10 of the FDD must disclose whether someone other than the franchisee personally guarantees franchisor financing.
A personal guaranty is a promise by a person, usually an owner or spouse, to be responsible for a debt that someone else owes. This page is short because the sources read for this site cover only one point about guaranties in the franchise setting. No neutral government source defining a guaranty in franchise agreements was found, so nothing here describes what a typical guaranty says.
What the Franchise Rule requires to be disclosed
Item 10 of the franchise disclosure document (FDD) covers financing the franchisor offers. The FTC's Franchise Rule says Item 10 must state "whether a person other than the franchisee must personally guarantee the debt." The same Item requires the franchisor to disclose "the franchisee's potential liabilities upon default," including any obligation to pay the entire amount due at once if the debt is accelerated.
That is a rule about what must be disclosed before a sale. It does not say that a guaranty follows the franchisee into a termination, what it covers, or how long it lasts. Those answers sit in the guaranty document and the financing papers, and in the law of the state that governs them.
What a court example shows about money after termination
A New York appeals court decision, NGM Mgt. Group, LLC v. Bareburger Group, LLC (2024), shows that contracts can attach financial consequences to a termination. The franchise agreements there were terminated for cause. The court held that a liquidated damages clause, set by reference to average monthly royalties over a period before termination, had not been shown to be an unenforceable penalty. It also granted the franchisor summary judgment on liability for attorneys' fees under a fee-shifting provision. The decision turns on New York law and its facts, and it did not concern a guaranty. See liquidated damages after termination.
Where to look in your own papers
A person asked to sign or already bound by a guaranty has their own interests, which may differ from the franchisee's. A lawyer licensed in the state can explain what a particular guaranty means. To find one, see franchise termination lawyer.
- The guaranty or personal undertaking, if you signed one, and the loan or financing agreement it refers to.
- Item 10 of the FDD you received, which says whether any guaranty of franchisor financing was required of someone other than the franchisee.
- The Item 17 row on the franchisee's obligations on termination or non-renewal. See [Item 17 of the FDD](/guides/item-17-of-the-fdd/).
Where this came from
- 16 CFR 436.5(j), Item 10 (checked 28 October 2026).
- NGM Mgt. Group, LLC v. Bareburger Group, LLC, 2024 NY Slip Op 00979 (checked 28 October 2026).