Will the insolvency of the Franchisee discharge the obligations in Section 4 for a Beverly Anns Cookie franchise?
Beverly_Anns_Cookie Franchise · 2025 FDDAnswer from 2025 FDD Document
- 4.8 Continuing Nature.
Owners agree that each of the obligations in this Section 4 shall be continuing and shall not be discharged by: (i) the insolvency of Franchisee or the payment in full of all of the obligations at any time; (ii) the power or authority or lack thereof of Franchisee to incur the obligations; (iii) the validity or invalidity of any of the obligations; (iv) the existence or non-existence of Franchisee as a legal entity; (v) the transfer or assignment of all or a portion of the ownership in Franchisee and/or the assets of Franchisee; (vi) the execution of an owners agreement or any other form of guaranty by any direct, indirect or beneficial owner of Franchisee in favor of us or our successors or assigns; (vii) any statute of limitations affecting the liability of Owners or the ability of us to enforce this Franchise Owner Agreement or the obligations; (viii) any right of offset, counterclaim or defense of any Owner, including, without limitation, those which have been waived by Owners pursuant to this Franchise Owners Agreement; or (ix) the expiration, termination or assignment of the Franchise Agreement or any other agreement between you or Franchisee and us or our affiliates.
Source: Item 23 — RECEIPTS (FDD pages 57–235)
What This Means (2025 FDD)
According to the 2025 Beverly Anns Cookie Franchise Disclosure Document, the insolvency of the franchisee will not discharge the obligations in Section 4. Section 4 pertains to the obligations of the Owners, who are essentially guarantors of the franchisee's obligations.
Specifically, Section 4.8 of the Franchise Agreement outlines that the obligations of the Owners are continuing and will not be discharged by several factors, including the insolvency of the franchisee. This means that even if the franchisee declares bankruptcy or becomes insolvent, the Owners remain responsible for fulfilling the obligations outlined in Section 4.
This provision protects Beverly Anns Cookie by ensuring that there are parties (the Owners) who remain liable for the franchisee's debts and obligations to the company, even if the franchisee's business fails financially. This is a common practice in franchising, as it provides an additional layer of security for the franchisor.