In the event of a Default as defined in the Franchise Agreement, what is the Guarantor obligated to do for a Buona franchise?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Obligations of Guarantor Upon Event of Default.
Should a Default (as defined in the Franchise Agreement) occur, Guarantor(s) shall diligently proceed to cure such Default at Guarantor's sole cost and expense;
- (a) Perform Work.
Franchisor may, at its option, proceed to perform on behalf of Guarantor any and all work related to the Franchise Business (as that term is described in the Franchise Agreement) and to pay any costs incurred in connection with the work.
Guarantor, upon Franchisor's demand, shall promptly pay to Franchisor all such sums expended together with interest thereon at the lesser of the rate of 1.5% per month or the highest rate of interest allowable under applicable law.
- (b) Cure Defaults.
Franchisor may, but without any obligation to do so, cure any defaults, including without limitation, paying any unpaid bills and liens, including without limitation those for construction, labor, and materials.
Guarantor, upon Franchisor's demand, shall promptly pay to Franchisor all such sums expended together with interest thereon at the lesser of the rate of 1.5% per month or the highest rate of interest allowable under applicable law.
- (c) Specific Performance.
From time to time and without first requiring performance on the part of Developer and without being required to exhaust any security held by Franchisor, to require Guarantor specifically to perform Guarantor's obligations under this Guaranty, by action at law or in equity or both, and further, to collect in any such action, compensation for all loss, cost, damage, injury and expense sustained or incurred by Franchisor as a direct or indirect consequence of Guarantor's failure to perform, with interest thereon at the lesser of the rate of 1.5% per month or the highest rate of interest allowable under applicable law.
Guarantor agrees that, until full payment of the amounts due to Franchisor from Developer under the Franchise Agreement, these amounts, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Developer, whether or not Developer becomes insolvent.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if a default occurs as defined in the Franchise Agreement, the Guarantor is obligated to diligently cure the default at their sole cost and expense. This obligation is original and independent, separate from the franchisee's obligations. The Guarantor's obligations are direct and primary, regardless of the validity or enforceability of the Franchise Agreement, and continue until all obligations are fulfilled.
Buona also has the option to perform any work related to the franchise business on behalf of the Guarantor and pay any associated costs. The Guarantor must then promptly reimburse Buona for all sums expended, along with interest at a rate of 1.5% per month or the highest rate allowable by law, whichever is less. Buona can also cure any defaults, such as paying unpaid bills and liens, without obligation, and the Guarantor is responsible for promptly paying these sums with the same interest rate applied.
Furthermore, Buona can require the Guarantor to specifically perform their obligations under the Guaranty through legal action and collect compensation for any losses or expenses incurred due to the Guarantor's failure to perform, again with interest at the lesser of 1.5% per month or the highest legally permissible rate. The Guarantor also agrees that their debt from the Developer to Buona is superior to any claim that the Guarantor may have against the Developer.
This arrangement protects Buona by ensuring that a Guarantor is responsible for correcting any defaults, providing Buona with multiple avenues for recourse, including performing the work themselves and demanding reimbursement with interest. For a prospective franchisee, this highlights the importance of a financially stable and reliable Guarantor, as their assets are at risk should the franchisee default. The terms also give Buona considerable power to manage and rectify defaults, potentially stabilizing the franchise's operation but also increasing the financial burden on the Guarantor.