Under the Aw franchise agreement, what does the Guaranty and Assumption of Obligations guarantee?
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 | Agreement, | 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.
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 ensures that if the franchisee is an entity, the owners of the entity personally guarantee the franchisee's performance under the Franchise Agreement. This means the owners are personally liable for the franchisee's obligations. Specifically, the owners guarantee that the franchisee will punctually pay and perform every undertaking, agreement, and covenant outlined in the Franchise Agreement.
Furthermore, the owners agree to be personally bound by and liable for any breaches of the Franchise Agreement. This includes both monetary obligations, such as royalty payments or marketing contributions, and obligations to take or refrain from specific actions. For example, if the franchisee is required to maintain certain quality standards or adhere to specific operating procedures, the owners personally guarantee that these obligations will be met.
The guaranty extends for the entire term of the Franchise Agreement and any extensions or renewals. The guarantors waive certain rights, including the right to require Aw to first pursue action against the franchisee before seeking recourse from the guarantors. This waiver underscores the direct and immediate liability of the guarantors.
This requirement is common in franchising, especially when the franchisee is a business entity rather than an individual. It provides Aw with an additional layer of security, ensuring that there are individuals with personal assets at stake who are motivated to ensure the franchisee complies with the terms of the agreement. Prospective Aw franchisees should carefully review the Guaranty and Assumption of Obligations with their legal counsel to fully understand the implications of this personal guarantee.