Does the Aw Guaranty and Assumption of Obligations require the Company to bring an action against the Franchisee before pursuing the guarantor?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the undersigned waives: (1) acceptance and notice of acceptance by the Company of the foregoing undertakings; (2) notice of demand for payment of any indebtedness or non-performance of any obligations hereby guaranteed; (3) protest and notice of default to any party with respect to the indebtedness or non-performance of any obligations hereby guaranteed; (4) any right he may have to require that an action be brought against Franchisee or any other person as a condition of liability; and (5) any and all other notices and legal or equitable defenses to which he may be entitled.
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 agreement stipulates that the company is not required to first bring an action against the franchisee before pursuing the guarantor. The guarantor waives any right to demand that Aw take action against the franchisee as a condition of the guarantor's liability. This means Aw can seek payment or performance directly from the guarantor if the franchisee fails to meet their obligations under the franchise agreement.
This waiver is significant for potential Aw franchisees because it increases the guarantor's risk. Typically, a guarantor might expect that the franchisor would first exhaust all remedies against the franchisee before seeking recourse from them. However, under this agreement, Aw has the flexibility to pursue the guarantor immediately upon the franchisee's default. This could expedite the recovery of owed amounts or enforcement of obligations for Aw, while simultaneously placing more immediate financial pressure on the guarantor.
For prospective franchisees, it is crucial to carefully consider who will be acting as a guarantor and ensure they fully understand the implications of this waiver. The guarantor should be fully aware that their assets are at risk from the moment the franchisee defaults, without Aw needing to first pursue legal action against the franchisee. This clause streamlines Aw's ability to enforce the agreement but places a higher burden and risk on the guarantor.