What happens if a Bambu franchisee's guaranty becomes unenforceable or inadequate?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement or Multi-Unit Development Agreement | Summary | |
|---|---|---|---|
| (h) | "Cause" defined-non-curable defaults | Section 19.1 of FA | For the Franchise Agreement: Unauthorized disclosure, conviction of a crime, abandonment, no Bambū Certified Team Leaders are present at or available to be at the Bambū shoppe for three consecutive days, unapproved transfers, bankruptcy 1 , assignment for benefit of creditors, unsatisfied judgments, levy, foreclosure, repeated violations, violate restrictive covenants, two insufficient funds checks, health and safety, misrepresentations, sexual harassment or discrimination, breach of other agreements between us or any of our affiliates and you or any of your affiliates, guaranty becomes unenforceable or inadequate, you become subject to the PATRIOT Act. |
| (i) | Franchisee's obligations on termination/non-renewal | Sections 19.3 and 19.4 of FA; Section 4.5 of MUDA | Pay outstanding amounts; pay an amount equal to the monthly Royalty Fees due over the remaining term under the Franchise Agreement if terminated due to your default; de-identification of shoppe; return of confidential information; covenant not to compete (see also o. and r. below); others. |
Source: Item 17 — (FDD pages 44–46)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, if a franchisee's guaranty becomes unenforceable or inadequate, it constitutes a 'cause' for termination of the Franchise Agreement. This means Bambu has grounds to terminate the franchise agreement if the guaranty, which is a promise from a third party to cover the franchisee's obligations, is no longer valid or sufficient.
This provision is significant for prospective franchisees because it highlights the importance of maintaining a valid and adequate guaranty throughout the term of the franchise agreement. If the financial situation of the guarantor changes, or if the guaranty is challenged and found to be unenforceable, the franchisee could face termination of their franchise agreement. The franchisee should ensure that the guaranty remains in good standing and meets Bambu's requirements.
Termination due to an unenforceable or inadequate guarantee is classified as a non-curable default. This means the franchisee does not have an opportunity to correct the issue to avoid termination. Upon termination, the franchisee must pay all outstanding amounts, an amount equal to the monthly Royalty Fees due over the remaining term under the Franchise Agreement, de-identify the shoppe, return confidential information, and adhere to a covenant not to compete.