Are the Angry Chickz guarantor's obligations limited to direct obligations of the franchisee?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
ll be entitled to receive payment of all Obligations prior to Guarantor's receipt of payment of any amount of any indebtedness of Franchisee to Guarantor. Guarantor will not exercise any rights which it may acquire by way of subrogation under this Continuing Guaranty, by any payment hereunder or otherwise, until all of the Obligations have been paid in full, in cash, and Franchisor shall have no further obligations to Franchisee under the Obligations or otherwise.
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- Certain Covenants Incorporated. Sections 12.1 (Non-Competition), 12.2 (Confidential Information), 12.5 (Effect of Applicable Law), and 17.1 (Arbitration), and 17.3 (Time for Bringing Claims) of the FA are incorporated into this Continuing Guaranty by reference, and Guarantor agrees to comply with and perform each of such covenants as though fully set forth in this Continuing Guaranty as a direct and primary obligation of Guarantor.
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- Assignment Of Franchisor's Rights. Franchisor may, from time to time, without notice to Guarantor, assign or transfer any or all of the Obligations or any interest therein and, notwithstanding any assignment(s) or transfer(s), the Obligations shall be and remain Obligations for the purpose of this Continuing Guaranty.
Source: Item 22 — CONTRACTS (FDD page 54)
What This Means (2025 FDD)
According to Angry Chickz's 2025 Franchise Disclosure Document, the guarantor's obligations extend beyond just the franchisee's direct obligations. Specifically, Section 6 of the Continuing Guaranty incorporates sections from the Franchise Agreement (FA), making them a direct and primary obligation of the guarantor. These sections include non-competition (12.1), confidential information (12.2), effect of applicable law (12.5), arbitration (17.1), and time for bringing claims (17.3). This means the guarantor is directly responsible for adhering to these covenants as if they were explicitly written into the guaranty itself.
Furthermore, the FDD states in section 11.4 that the guarantor's obligations are joint and several with any other person or entity that guarantees the obligations, even if those guarantees are separate from the Continuing Guaranty. This implies that the guarantor's liability isn't strictly limited to the franchisee's specific debts but can extend to other liabilities related to the franchise operation. The guarantor also represents that they are fully aware of the franchisee's financial condition and accepts the risk that the franchisee may incur additional obligations for which the guarantor may be liable.
In practical terms, this means that if you are considering acting as a guarantor for an Angry Chickz franchise, you need to be aware that your financial exposure could go beyond the initial franchise fees and ongoing royalties. You could be held liable for breaches of confidentiality, violations of non-compete agreements, or other legal claims related to the franchise. You should conduct thorough due diligence on the franchisee's business plan and financial stability, and carefully consider the full extent of the potential liabilities before signing the Continuing Guaranty. It would be prudent to seek legal counsel to fully understand the implications of these clauses.