Under the Angry Chickz Continuing Guaranty, what is the Guarantor's obligation regarding any indebtedness of the Franchisee to the Guarantor?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
Guarantor subordinates any and all indebtedness of Franchisee to Guarantor to the full and prompt payment and performance of all of the Obligations.
Franchisor shall 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.
Source: Item 22 — CONTRACTS (FDD page 54)
What This Means (2025 FDD)
According to Angry Chickz's 2025 Franchise Disclosure Document, the Guarantor's obligation regarding any indebtedness of the Franchisee to the Guarantor is that the Guarantor subordinates any and all indebtedness of the Franchisee to the Guarantor to the full and prompt payment and performance of all of the obligations. This means that Angry Chickz is entitled to receive payment of all obligations before the Guarantor receives any payment from the Franchisee regarding any debts the Franchisee owes the Guarantor.
Furthermore, the Guarantor cannot exercise any rights acquired through subrogation under the Continuing Guaranty until all obligations to Angry Chickz are paid in full and in cash. Subrogation refers to the right of the Guarantor to step into the shoes of Angry Chickz and claim the rights Angry Chickz has against the Franchisee, but this right is suspended until Angry Chickz has been fully paid.
In practical terms, this clause ensures that Angry Chickz's financial interests are prioritized over any financial claims the Guarantor may have against the Franchisee. This is a common provision in franchise agreements to protect the franchisor's revenue stream and ensure the financial stability of the franchise system. A prospective franchisee should carefully consider the implications of this subordination and subrogation clause, especially if they are relying on financial support or guarantees from individuals or entities who may also have a financial stake in the franchise's success.