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All too often spouses who jointly own the franchisee corporation and jointly guarantee the obligations of the corporation, or the husband and wife jointly sign as “franchisee” in their personal capacities.

Given that not all such business opportunities succeed, would you, as a prospective franchisee, really wish to have your spouse exposed to this potential liability? This is especially so where only one of you will be actively involved in the franchised business. In other words, if a guarantee or personal covenant is required, must both you and your spouse take on the potential exposure? Or should only one of you be the covenanting party, taking the risk and being prepared to take the loss; the other party being shielded from such loss?

Too often, one spouse, even with independent legal advice, signs a franchise agreement as guarantor, co-franchisee, or associate, but has minimal or non-existent involvement in or knowledge about the management of the business. A failed business means both parties are subject to possible execution against their personal assets, which may include the family home and perhaps retirement savings. So perhaps only one spouse should give the guarantee or personal covenant. In these circumstances, it’s worth clarifying with the franchisor.

Finally, in respect of a personal guarantee or covenant, is it possible to “cap” the exposure at a limited amount of money or a limited number of months worth of royalties? This is also worth discussing with the franchisor.