When are the obligations of the franchisee and guarantor considered fully paid and discharged to All County?
All_County Franchise · 2025 FDDAnswer from 2025 FDD Document
The obligations of Franchisee and Guarantor, as described herein and in the Agreement, shall not be considered fully paid, performed and discharged unless and until all payments by Franchisee to us are no longer subject to any right on the part of any person to set aside such payments or to seek to recoup the amount of such payments. The foregoing shall include, by way of example and not by way of limitation, all rights to recover preferences voidable under Title 11 of the United States Code. If any such payments by Franchisee to us are set aside in whole or in part after being made, or are settled without litigation, to the extent of such settlement, all of which is in our business judgment, the Guarantor shall be liable, jointly and severally for the full amount of our costs, interest, attorney's fees and any and all expenses which we pay or incur in connection therewith.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to All County's 2025 Franchise Disclosure Document, the obligations of the franchisee and guarantor are not considered fully paid, performed, and discharged until all payments by the franchisee to All County are no longer subject to any right of any person to set aside such payments or seek to recoup the amount of such payments. This includes rights to recover preferences voidable under Title 11 of the United States Code.
This means that even after a franchisee makes payments to All County, there's a possibility that these payments could be clawed back, for example, in the event of bankruptcy proceedings. Until the period where such clawbacks are possible has passed, the franchisee's obligations are not considered fully discharged. This protects All County from having to return payments they've already received if the franchisee later faces financial difficulties.
Furthermore, if any payments made by the franchisee to All County are set aside, either in whole or in part, or are settled without litigation, the guarantor remains liable for the full amount of All County's costs, interest, attorney's fees, and any and all expenses incurred in connection with the matter. This ensures that All County is fully compensated for any losses or expenses incurred if payments are clawed back or settled.
This clause highlights the importance of the guarantor's role in ensuring All County receives all payments due. The guarantor's liability extends beyond the initial payment to cover any costs associated with recovering payments that are later set aside or settled. Prospective franchisees and their guarantors should carefully consider this provision and understand the potential financial implications before entering into a franchise agreement with All County.