Under the Azal Coffee Guaranty, what happens if the Indebtedness is reduced and later increased?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
Guarantor waives notice of acceptance of this Guaranty and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which Guarantor might otherwise be entitled, and diligence in collecting any Indebtedness, and agrees that Franchisor may, once or any number of times, modify the terms of any Indebtedness, compromise, extend, increase, accelerate, renew, or forbear to enforce payment of any or all Indebtedness, or permit Franchisee to incur additional Indebtedness, all
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the guarantor's obligations remain even if the debt is modified. Specifically, the guarantor waives any notice regarding modifications to the debt, including increases. This means that even if the franchisee's debt is initially reduced and later increased, the guarantor is still responsible for the full amount of the debt, without needing to be notified of the changes.
This clause protects Azal Coffee by ensuring that the guarantor remains liable for the debt, regardless of any changes made to the terms of the indebtedness. The guarantor cannot claim that their obligation is reduced or eliminated because the debt was modified without their knowledge. This is a significant risk for the guarantor, as they could be responsible for a larger debt than they initially anticipated.
For a prospective Azal Coffee franchisee, this highlights the importance of carefully considering who acts as a guarantor. The guarantor should be fully aware of the potential financial risks and understand that their obligations are not diminished by modifications to the debt. It is advisable for the guarantor to seek independent legal and financial advice before signing the guaranty agreement to fully understand the implications of this clause.