Can the Company surrender any collateral for the obligations without notice to the Browns Chicken guarantor?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
With respect to the Obligations, the Company may from time to time, without notice to any of the undersigned and without affecting the liability of any of the undersigned: (a) surrender, release, impair, sell or dispose of any security or collateral for the Obligations, (b) surrender, release or not agree to sue any guarantor or surety, (c) fail to perfect a security interest in or realize upon any security or collateral, (d) fail to realize upon any of the Obligations or to proceed against Franchisee or any guarantor or surety, (e) renew or extend the time for payment, (f) accept additional security or collateral, (g) determine the allocation and application of payments and credits and accept partial payments, (h) determine what, if anything, may at any time be done with reference to any security or collateral, and (i) settle or compromise the amount due or owing or claimed to be due or owing.
Each of the undersigned expressly consents to and waives notice of all of the above.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the company can surrender collateral for obligations without notifying the guarantor. Specifically, the FDD states that Browns Chicken may, without notice to the guarantor, surrender, release, impair, sell, or dispose of any security or collateral for the obligations.
This clause means that if a franchisee's obligations are secured by collateral, Browns Chicken has the right to manage or dispose of that collateral without informing the guarantor. This could include selling assets, releasing liens, or otherwise altering the security interest in the collateral. The guarantor's liability remains unaffected by these actions, meaning they are still responsible for the franchisee's obligations even if the collateral's value or availability changes.
This provision protects Browns Chicken by giving it flexibility in managing the collateral and the franchisee's obligations. However, it places a significant risk on the guarantor, who may find that the collateral securing the obligations has been diminished or eliminated without their knowledge. Prospective guarantors should carefully consider this provision and its potential impact on their liability before agreeing to guarantee a Browns Chicken franchise.