Are the obligations of the Guarantors in Exhibit C of the Buona Area Development Agreement personal?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
st date for Execution of Lease or Date for Purchase Agreement for Commencement Franchisor Approved Site of Operations Upon the execution of this Agreement FRANCHISOR: CHICAGO'S ORIGINAL ITALIAN BEEF FRANCHISING LLC DEVELOPER: [ENTITY NAME] An Illinois limited liability Franchisor A Dated: Dated: FRANCHISOR INITIALS______ ______DEVELOPER INITIALS
ADA 2025 - 17 -
EXHIBIT C TO THE AREA DEVELOPMENT AGREEMENT
| THIS GUARANTY AND ASSUMPTION OF DEVELOPER'S OBLIGATIONS ("Guaranty") is made as of, 20, in consideration of, and as an inducement to, the execution of the Franchise Agreement by Chicago's Original Italian Beef Franchising LLC, an Illinois limited liability company ("Franchisor"). In consideration thereof, each of the undersigned hereby jointly and severally, personally and unconditionally agrees as follows: |
|---|
| 1. |
| Guaranty. |
| Guarantor(s) hereby unconditionally and absolutely warrants and |
| guarantees to Franchisor that ("Developer") shall punctually pay and perform in full |
| each and every undertaking, agreement and covenant set forth in the Franchise Agreement; |
| 2. |
| 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; |
| 3. |
| Nature of Guaranty. |
| This Guaranty is an original and independent obligation of |
| Guarantor(s), separate and distinct from Developer's obligations to Franchisor under the Area |
| Development |
| 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. |
| 4. |
| 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. |
| 5. |
| Guarantor's Representations and Warranties. |
| Guarantor(s) represents and |
| warrants to Franchisor that: (a) no representations or agreements of any kind have been made to |
| Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is |
| executed at Developer's request and Franchisor would not execute the Franchise Agreement were it |
| not for the execution and delivery of this Guaranty; (c) Guarantor has not and will not, without the |
| prior written consent of Franchisor, sell, lease, assign, encumber, hypothecate, transfer or otherwise |
| dispose of all, or substantially all, of Guarantor's assets, or any interest therein if any such event would |
| have a material negative effect on Guarantor's ability to perform its obligations under this Guarantor |
| or the Franchise Agreement; (d) neither the execution nor the delivery of this Guaranty, nor compliance |
| with the terms hereof, will conflict with or result in the breach of any law or statute, will constitute a |
| breach or default under any agreement or instrument to which Guarantor may be a party, or will result |
| in the creation or imposition of any charge or lien upon any property or assets of Guarantor; (e) |
| Franchisor has made no representation to Guarantor as to the creditworthiness of Guarantor; |
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the obligations of the guarantors under Exhibit C of the Area Development Agreement are indeed personal. Specifically, the document states that the guarantors jointly and severally, personally and unconditionally agree to guarantee the developer's obligations to Buona. This means each guarantor is individually liable for the full extent of the developer's obligations.
This personal guarantee requires owners of the developing entity to assume direct responsibility for the financial and operational commitments outlined in the Area Development Agreement. If the developing entity fails to meet its obligations, Buona can pursue individual guarantors for fulfillment of the agreement. This is a standard practice in franchising, as it provides the franchisor with an additional layer of security and assurance that the developer is fully committed to the venture.
The guarantor's obligations are original and independent from the developer's obligations. This means that the guarantor's liability exists regardless of the validity or enforceability of the Area Development Agreement itself. The guarantor also authorizes Buona to make changes to the Franchise Agreement without lessening the guarantor's liability. The guarantor represents and warrants that they have the capacity and resources to fulfill the obligations, and that their assets are not encumbered in a way that would prevent them from meeting their obligations under the guaranty.
Prospective Buona developers should carefully consider the implications of providing a personal guarantee, as it puts their personal assets at risk should the development entity fail to meet its obligations under the Area Development Agreement. It is advisable to seek legal and financial counsel to fully understand the scope and potential consequences of this guarantee.