Does the Guarantor for a Benihana franchise waive any defense based on irregularities or defects in the creation of any obligations?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
The term "Obligations" means the payment of all of FRANCHISEE's debts, liabilities, and obligations to FRANCHISOR arising under the BENIHANA Agreements, whether direct, indirect, absolute, contingent, matured or unmatured, extended or renewed, wherever and however incurred, together with all costs of collection, compromise and enforcement, including reasonable attorney's fees, and the prompt performance of each and every covenant, agreement, and condition set forth in any of the BENIHANA Agreements.
3. Waivers by GUARANTOR. GUARANTOR hereby waives:
- (a) acceptance and notice of acceptance by FRANCHISOR of the foregoing Guaranty;
- (b) notice of demand for payment of FRANCHISEE's indebtedness or nonperformance of any of the Obligations;
- (c) presentment or protest of any instrument and notice thereof or any notice of default or intent to accelerate with respect to the indebtedness or nonperformance of any of the Obligations;
- (d) any right GUARANTOR may have to require that an action be brought against FRANCHISEE or any other person as a condition of GUARANTOR's liability;
- (e) the defense of the statute of limitations in any action for the enforcement, performance, or collection of any Obligation;
- (f) any and all rights to payments, indemnities, and claims for reimbursement or subrogation that GUARANTOR may have against FRANCHISEE arising from GUARANTOR'S execution of and performance under this Guaranty;
- (g) any defense based on any irregularity or defect in the creation of any of the Obligations or modification of the terms and conditions of performance thereof;
- (h) any defense based on the failure of FRANCHISOR or any other party to take, protect, perfect, or preserve any right against and/or security granted by the FRANCHISEE or any other party;
- (i) any and all other notices and legal or equitable defenses to which GUARANTOR may be entitled.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the Guarantor does waive certain defenses. Specifically, the Guarantor waives any defense based on irregularities or defects in the creation of any of the obligations or modification of the terms and conditions of performance. This means the guarantor cannot avoid their obligations by claiming there were issues with how the franchise agreement or related obligations were initially established or later changed.
This waiver is part of a broader set of waivers the Guarantor makes, including waiving notices related to acceptance of the guaranty, demands for payment, and rights to require action against the franchisee before pursuing the Guarantor. The Guarantor also waives defenses related to the statute of limitations and rights to payments or claims against the franchisee.
For a prospective Benihana franchisee, this indicates that if a guarantor is required for the franchise agreement, that guarantor will have limited ability to challenge their obligations under the guaranty. They are essentially agreeing to be fully responsible for the franchisee's obligations, even if there were flaws or changes in the underlying agreements. This could make it more difficult for the guarantor to avoid liability if the franchisee defaults. Franchisees should ensure that any potential guarantors fully understand the scope of this waiver before signing the guaranty agreement.