Under the Budget Guarantee, are the Guarantor's obligations affected by the death or insolvency of the Licensee?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The obligations of the Guarantors hereunder will not be affected by any act, omission or circumstances which but for this Guarantee might operate to release or otherwise exonerate the Guarantors from their obligations hereunder or affect such obligations, including, without limitation and whether or not known to the Guarantors, Budget or Licensee:
- (e) The death or insolvency of the Licensee or any Guarantor; or
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the obligations of the Guarantors under the guarantee will not be affected by the death or insolvency of the Licensee. This means that even if the Licensee (the franchisee) dies or becomes insolvent (unable to pay debts), the Guarantors are still responsible for fulfilling the obligations outlined in the guarantee.
This provision protects Budget by ensuring that the financial obligations of the franchise agreement are met even if the original franchisee is no longer able to fulfill them due to death or insolvency. The guarantor essentially steps in to cover any outstanding debts or obligations.
For a prospective Budget franchisee, this highlights the importance of understanding the full scope of the personal guarantee. If you are acting as a guarantor, you need to be aware that your obligations continue even if the franchisee's business fails or they pass away. This could have significant financial implications for the guarantor and their estate.
This type of clause is relatively standard in franchising, as franchisors seek to minimize their risk and ensure financial stability. Franchisees should carefully consider the implications of any personal guarantees and seek legal advice before signing any agreements.