If a Default occurs under the Buona Franchise Agreement, what is the Guarantor obligated to do?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
-
- 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;
-
- Nature of Guaranty.
This Guaranty is an original and independent obligation of Guarantor(s), separate and distinct from Franchisee's obligations to Franchisor under the Franchise Agreement.
The obligations of Guarantor to Franchisor under this Guaranty are direct and primary, regardless of the validity or enforceability of the Franchise Agreement.
This Guaranty is for the benefit of Franchisor and is not for the benefit of any third party.
This Guaranty shall continue until all obligations of Guarantor to Franchisor under this Guaranty have been performed in full.
-
- Guarantor's Authorization to Franchisor.
Guarantor(s) authorizes Franchisor, without notice or demand and without lessening Guarantor's liability under this Guaranty, from time to time: (a) to make or approve changes to the Franchise Agreement; (b) to repeatedly compromise, renew, extend, accelerate, or otherwise change the time for payment or other terms of the Franchise Agreement; (c) to take and hold security for the payment of amounts due under the Franchise Agreement or this Guaranty, and exchange, enforce, waive, and release any such security, with or without the substitution of new collateral; (d) to determine how, when, and what application of payments and credits shall be made on amounts due under the Franchise Agreement; and (j) to assign or transfer this Guaranty, in whole or in part.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if a default occurs under the Franchise Agreement, the Guarantor is obligated to diligently proceed to cure such default at the Guarantor's sole cost and expense. This means the guarantor takes on the responsibility of fixing whatever problem caused the default, and they must pay for it themselves. This obligation is a key part of the Guaranty agreement, ensuring Buona has recourse beyond just the franchisee.
The Guaranty is an original and independent obligation, separate from the franchisee's obligations. This means Buona can pursue the guarantor directly, regardless of the validity or enforceability of the Franchise Agreement itself. The Guaranty benefits Buona and no other third party, and it remains in effect until all obligations of the Guarantor are fully performed. This highlights the importance of the guarantor's role in ensuring the financial and operational stability of the Buona franchise.
Furthermore, the Guarantor authorizes Buona to make changes to the Franchise Agreement, compromise, renew, extend, or otherwise alter payment terms without lessening the Guarantor's liability. Buona can also take and hold security for amounts due and determine how payments are applied. This broad authorization gives Buona significant flexibility in managing the franchise relationship without needing constant approval from the Guarantor. The Guarantor's obligations extend to specifically performing their duties under the Guaranty, and Buona can seek legal action to enforce this, collecting compensation for any losses incurred due to the Guarantor's failure to perform, with interest potentially accruing at the lesser of 1.5% per month or the highest rate allowable by law.