If a guarantor of the Bambu franchise agreement defaults, how does this affect the franchise agreement?

According to Bambu's 2025 Franchise Disclosure Document, a default by any guarantor of the Franchise Agreement is considered a default of the Franchise Agreement itself. This is due to cross-default provisions outlined in the agreement. This means that if a guarantor fails to meet their obligations, Bambu can take action against the franchisee as if the franchisee had defaulted.

This provision is significant for prospective Bambu franchisees because it highlights the importance of the guarantor's financial stability and reliability. If the guarantor experiences financial difficulties or fails to uphold their obligations, the franchise could be at risk, even if the franchisee is otherwise in good standing. The franchisee should carefully consider the implications of the guaranty and ensure that the guarantor fully understands their responsibilities and has the capacity to meet them.

Furthermore, the guaranty agreement included as Attachment II to the Franchise Agreement stipulates that the guarantor is essentially bound by all the terms and conditions of the Franchise Agreement. The guarantor guarantees that the franchisee will punctually pay and perform every undertaking, agreement, and covenant set forth in the agreement. The guarantor also agrees to be personally bound by and personally liable for the breach of each and every provision in the agreement, including terms pertaining to noncompetition, confidentiality, and the use of Bambu's marks and copyrighted works.

In essence, the cross-default provision and the guaranty agreement work together to provide Bambu with additional security and recourse in case of a default. Prospective franchisees should carefully evaluate the financial health and reliability of any potential guarantor and fully understand the implications of the guaranty before entering into a franchise agreement with Bambu.