In the Bevaris Alliance franchise agreement, is the Individual's guarantee considered a separate obligation?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
hat the net receipt, after tax, to Franchisor in respect of the payment is the same as it would have been were the payment not subject to tax.
- 21.6 Nothing in this clause shall restrict or limit Franchisor's general obligation at law to mitigate a loss it may suffer or incur as a result of an event that may give rise to a claim under this indemnity.
22. Individual's guarantee and covenants
- 22.1 In consideration of the Franchisor entering into this agreement with the Franchisee, the Individual, as primary obligor, irrevocably and unconditionally as separate and independent obligations:
- (a) guarantees the full, prompt and complete performance by the Franchisee of each of its obligations under this agreement and the Food Service Agreements;
- (b) guarantees the punctual payment of all sums payable by the Franchisee under this agreement or in consequence of any breach of the provisions of this agreement;
- (c) undertakes, immediately on demand, to perform or procure the performance of all the Franchisee's obligations referred to in clause 22.1(a) and clause 22.1(b); and
- (d) undertakes to pay to the Franchisor, immediately on demand and unconditionally, such sum to make good all losses, damage, costs and expenses arising out of the Franchisee's failure to perform such obligations, or pay such sums on the due date, or the Individual's failure to comply with the provisions of clause 22.1(a), clause 22.1(b) and clause 22.1(c).
- 22.2 Before making a demand under clause 22.1, it shall not be necessary for the Franchisor to have made a demand on, taken out proceedings against, or taken any action to enforce any security against the Franchisee or any other person.
- 22.3 The Individual's liability under this clause 22 shall be joint and several and shall not be reduced, discharged or adversely affected in any way, by:
- (a) any unenforceability, invalidity, irregularity, frustration or discharge by operation of law of any of the Franchisee's obligations under this agreement; or
- (b) any legal limitation, disability, incapacity or other circumstances relating to the Franchisee or any other person; or
- (c) the Franchisor compromising, varying, extending, dealing with, renewing, releasing, refusing or neglecting to perfect or enforce any right, remedy or security against the Franchisee or any other person in respect of this agreement or any other document or security; or
- (d) anything which, but for this provision, might discharge, reduce or extinguish any of the Individual's liabilities under this clause 22.
- 22.4 The Individual's guarantee is a continuing guarantee and shall continue in effect until the Franchisee has paid and performed all sums and all obligations under this agreement.
- 22.5 The Individual shall not, until all of the Franchisee's obligations under this agreement have been finally performed and paid in full, exercise any right:
- (a) of subrogation and indemnity; or
- (b) to take the benefit of, share in or enforce any security or other guarantee or indemnity for any of the Franchisee's obligations;
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, the Individual's guarantee is considered a separate and independent obligation. Specifically, clause 22.1 states that the Individual, as the primary obligor, irrevocably and unconditionally guarantees the franchisee's performance and payments under the agreement. This means that the Individual's guarantee is not contingent on the franchisee's obligations but stands alone as a direct commitment to Bevaris Alliance.
This separation of obligation has significant implications for the Individual, who is typically a principal or owner of the franchisee entity. The Individual's personal assets are at risk should the franchisee fail to meet its financial or operational obligations. Bevaris Alliance does not need to first pursue action against the franchisee before demanding performance or payment from the Individual, as stated in clause 22.2. This provides Bevaris Alliance with a direct and immediate recourse against the Individual, making the guarantee a powerful tool for ensuring compliance with the franchise agreement.
Furthermore, the Individual's liability is joint and several, meaning that the Individual is fully liable alongside the franchisee. The Individual's guarantee remains in effect until all obligations of the franchisee are completely fulfilled, as noted in clause 22.4. The Individual also agrees to assure the franchisee performs all obligations, devote full-time attention to the business, be a director/officer/managing member, and hold over 50% of the voting capital, as stated in clause 22.7. These conditions underscore the significant responsibilities and potential liabilities the Individual assumes under the Bevaris Alliance franchise agreement.