Under the Bevaris Alliance agreement, is the Individual's guarantee considered a continuing guarantee?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
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; or
(c) to prove in the liquidation of the Franchisee, other than in accordance with the Franchisor's instructions.
22.6 If the Individual exercises any of the rights referred to in clause 22.5, he or she shall:
- (a) hold any amounts recovered on trust for the Franchisor; and
- (b) pay them to the Franchisor on demand.
- 22.7 During the Term, the Individual shall:
- (a) assure that the Franchisee performs all its obligations under this agreement;
- (b) devote his full-time attention and effort to the Franchisee's Business;
- (c) be a director, officer, or managing member of the Franchisee; and
- (d) hold, in his or her own name, more than 50% of the issued voting capital of the Franchisee.
- 22.8 The Individual may not assign or transfer any of his rights or obligations under this agreement.
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 explicitly defined as a continuing guarantee. This means that the Individual's guarantee remains in effect until the Franchisee has fully paid all sums and fulfilled all obligations under the franchise agreement. This ensures that Bevaris Alliance has ongoing security for the Franchisee's performance.
This continuing guarantee has significant implications for the Individual, who typically is a principal or owner of the Franchisee entity. The Individual cannot exercise rights of subrogation or indemnity, or benefit from any security related to the Franchisee's obligations until all obligations are fully satisfied. This restriction protects Bevaris Alliance's interests by preventing the Individual from competing with the Franchisor's claims against the Franchisee.
Furthermore, the Individual is obligated to ensure the Franchisee performs all obligations, devote full-time attention to the Franchisee's business, be a director/officer/managing member of the Franchisee, and hold more than 50% of the Franchisee's voting capital. These requirements ensure the Individual remains actively involved and committed to the success and compliance of the Bevaris Alliance franchise. The Individual cannot transfer their rights or obligations under the agreement, reinforcing their long-term commitment.
In essence, the continuing guarantee and associated covenants place a substantial responsibility on the Individual, aligning their interests with the success and full compliance of the Bevaris Alliance franchise. Prospective franchisees should carefully consider these obligations and potential liabilities before entering into the agreement.