Under the All County Guaranty, what happens if payments are settled without litigation?
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 Guarantor's liability extends to situations where payments are settled without litigation. Specifically, if any payments made by the franchisee to All County are later settled without litigation, the guarantor is liable for All County's costs, interest, attorney's fees, and any expenses incurred in connection with the settlement. This liability is joint and several, meaning each guarantor is individually responsible for the full amount.
This provision protects All County in cases where initial payments from a franchisee are later compromised or reduced through settlement. The guarantor ensures that All County is made whole for any losses, including legal and administrative costs, even if the matter doesn't proceed to court. This clause is part of the broader Guaranty agreement, which ensures the franchisee's obligations are met.
For a prospective All County franchisee, this means that anyone acting as a guarantor (often a spouse or business partner) needs to understand the full extent of their financial exposure. The guarantor's responsibility isn't limited to instances of legal action but also covers situations where All County agrees to a settlement. This could have significant financial implications for the guarantor, as they could be responsible for covering substantial costs even if the underlying debt is reduced through negotiation.
It is important for both the franchisee and the guarantor to carefully review the terms of the Guaranty agreement and understand the potential liabilities involved. Consulting with a legal professional is advisable to fully grasp the implications of this clause and the overall financial commitment being made.