Does the Aw Guaranty and Assumption of Obligations apply to amounts recovered from the Company in a bankruptcy proceeding?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the undersigned consents and agrees that: (1) his direct and immediate liability under this Guaranty will be joint and several with all other current and future guarantors of Franchisee's obligations; (2) he will render any payment or performance required under the Agreement upon demand if Franchisee fails or refuses punctually to do so; (3) such liability will not be contingent or conditioned upon pursuit by the Company of any remedies against Franchisee or any Other person; (4) such liability will not be diminished, relieved or otherwise affected by any extension of time, credit or other indulgence which the Company may from time to time grant to Franchisee or to any Other person, including without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable during the term of the Agreement; and (5) this Guarantee shall apply to any amounts recovered from Company as a preference, fraudulent transfer or otherwise in a bankruptcy or similar proceeding.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the Guaranty and Assumption of Obligations does apply to amounts recovered from the company in a bankruptcy proceeding. Specifically, the guaranty covers amounts recovered from Aw as a preference, fraudulent transfer, or otherwise in a bankruptcy or similar proceeding. This means that the guarantor's obligations extend to situations where Aw has to return funds in a bankruptcy scenario.
This provision is significant for potential Aw franchisees because it clarifies the extent of the guarantor's liability. The guarantor, who is typically a principal of the franchisee entity, is not only guaranteeing the franchisee's performance under the franchise agreement but also potentially liable for amounts that Aw might have to return in a bankruptcy case. This could include royalties, fees, or other payments that were deemed preferential or fraudulent transfers.
For a prospective franchisee, this highlights the importance of understanding the financial stability of Aw. If Aw were to face financial difficulties and enter bankruptcy, the guarantor could be required to cover amounts recovered from Aw, adding another layer of financial risk to the franchise investment. Franchisees should seek legal and financial advice to fully understand the implications of this clause and the overall financial health of Aw.