What is the relationship between the Aw Franchise Agreement and the Guaranty and Assumption of Obligations?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of, and as an inducement to, the execution of that certain Franchise Agreement of even date herewith (the "Agreement") by Rayyan Pizza Franchise LLC (the "Company"), each of the undersigned hereby personally and unconditionally, jointly and severally: (a) guarantees to the Company, and its successors and assigns, for the term of the Agreement and thereafter | as | provided | in | the | | that | | ("Franchisee") will punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement; and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities.
Upon the execution of this Agreement, all Owners of the franchisee entity shall execute the Guaranty and Assumption of Obligations attached as Exhibit 2.
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 is directly related to the Franchise Agreement. Specifically, the Guaranty and Assumption of Obligations is executed in consideration of, and as an inducement to, the execution of the Franchise Agreement. This means that the franchisor, Rayyan Pizza Franchise LLC, requires a personal guarantee to ensure the franchisee fulfills their obligations under the agreement. The document also indicates that the Guaranty and Assumption of Obligations is attached as Exhibit 2 to the Franchise Agreement. Furthermore, all owners of the franchisee entity are required to execute this guarantee upon the execution of the Franchise Agreement.
In practical terms, this means that individuals signing the Guaranty and Assumption of Obligations are personally liable for the franchisee's performance under the Franchise Agreement. This includes both monetary obligations, such as paying fees and royalties, and non-monetary obligations, such as adhering to operational standards. The guarantor is essentially promising that the franchisee will meet all requirements of the agreement and agreeing to be personally bound by and liable for any breaches.
This arrangement is a common practice in franchising, especially when the franchisee is a corporate entity. It provides Aw with an additional layer of security, ensuring that there are individuals with personal assets at stake who are committed to the success and compliance of the franchise. The guarantor waives certain rights, such as requiring Aw to first pursue action against the franchisee before seeking recourse from the guarantor. The guarantor's liability is joint and several with other guarantors, meaning Aw can pursue any guarantor for the full amount of the obligation.
Prospective Aw franchisees should carefully review the Guaranty and Assumption of Obligations with legal counsel to fully understand the extent of their personal liability. They should also be aware that this guarantee remains in effect for the term of the Franchise Agreement and is continuing and irrevocable, meaning it cannot be canceled or withdrawn during the agreement's term. The FDD also states that the guarantee applies to any amounts recovered from the company as a preference, fraudulent transfer, or otherwise in a bankruptcy or similar proceeding.