Does the Azal Coffee Guaranty cover indebtedness for which the Franchisee would be liable but for invalidity due to bankruptcy?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
| Each of the persons signing this Guaranty (each a "Guarantor"), in order to induce Durar |
|---|
| Investment, LLC ("Franchisor") to enter into a Franchise Agreement, dated the day of |
| , 20, with |
| ("Franchisee"), unconditionally and absolutely guaranties payment when due, whether by stated |
| maturity, demand, acceleration or otherwise, of all existing and future indebtedness |
| ("Indebtedness") of Franchisee to Franchisor. Indebtedness includes without limit: any and all |
| obligations or liabilities of the Franchisee to Franchisor under the Franchise Agreement or any other |
| agreement between the Franchisor and Franchisee or otherwise arising, whether absolute or |
| contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, |
| known or unknown; any and all indebtedness, obligations or liabilities for which Franchisee would |
| otherwise be liable to Franchisor were it not for the invalidity, irregularity or unenforceability of them |
| by reason of any bankruptcy, insolvency or other law or order of any kind, or for any other reason; |
| any and all amendments, modifications, renewals and/or extensions of any of the above; and all |
| costs of collecting Indebtedness, including, without limit, actual attorneys' fees. In addition, |
| Guarantor agrees as follows: |
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the Guaranty covers indebtedness for which the Franchisee would be liable but for invalidity due to bankruptcy. The Guaranty ensures payment of all existing and future indebtedness of the Franchisee to Azal Coffee. This includes any obligations or liabilities for which the Franchisee would otherwise be responsible to Azal Coffee, even if those obligations are unenforceable due to bankruptcy, insolvency, or any other law or order.
This means that if the Franchisee's business fails and they declare bankruptcy, the Guarantor is still responsible for covering the Franchisee's debts to Azal Coffee. The term "Indebtedness" is broadly defined to include all types of liabilities, whether direct or indirect, voluntary or involuntary, liquidated or unliquidated, and known or unknown. It also encompasses any amendments, modifications, renewals, or extensions of the original debt, as well as all costs associated with collecting the debt, including attorney's fees.
For a prospective Azal Coffee franchisee, this implies that anyone signing the Guaranty (likely the franchisee themselves or a close associate) takes on a significant financial risk. They are not only guaranteeing the initial investment and franchise fees but also any future debts the business may incur. This could include unpaid royalties, marketing fees, or costs for products and services provided by Azal Coffee. The Guarantor's assets are at risk if the Azal Coffee franchise fails, even if the failure is due to circumstances like bankruptcy that might otherwise discharge the Franchisee's obligations.
It is crucial for potential franchisees and their guarantors to fully understand the scope of this Guaranty and to assess their financial capacity to cover potential debts. They should seek legal and financial advice to evaluate the risks involved before signing the Franchise Agreement and the Guaranty. This level of personal guarantee is common in franchising, as it provides the franchisor with added security, but it places a substantial burden on the guarantor.