What is the purpose of the Guaranty in Exhibit C of the Buona Area Development Agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
| EXHIBIT A: | APPROVED LOCATION AND BUONA PROTECTED AREA ADDENDUM |
|---|---|
| EXHIBIT B: | ADDENDUM TO LEASE AND COLLATERAL ASSIGNMENT OF LEASE |
| EXHIBIT C: | AUTOMATED CLEARING HOUSE PAYMENT AUTHORIZATION FORM |
| EXHIBIT D: | STATEMENT OF OWNERSHIP |
| EXHIBIT E: | GUARANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS |
| EXHIBIT F: | SECURITY AGREEMENT |
Owners of the Developer, and all such Owners must execute the Guaranty and Assumption of Obligations which is attached hereto as Exhibit C concurrently with the execution of this Agreement by Developer.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, Exhibit C to the Area Development Agreement is not a Guaranty. Instead, Exhibit C is an Automated Clearing House Payment Authorization Form. However, the document does discuss a Guaranty and Assumption of Obligations in the Area Development Agreement, which is attached as Exhibit E, not Exhibit C. All owners of the Developer entity must execute this Guaranty concurrently with the execution of the Area Development Agreement.
The purpose of the Guaranty is to ensure that the Developer (the entity entering into the Area Development Agreement) fulfills its obligations. The Guarantors (the owners of the Developer) personally and unconditionally guarantee that the Developer will punctually pay and perform all undertakings, agreements, and covenants set forth in the Franchise Agreement. This means that if the Developer fails to meet its financial or operational obligations, the Guarantors become personally liable for those obligations.
If a default occurs under the Franchise Agreement, the Guarantors are obligated to cure the default at their own cost and expense. This Guaranty is an independent obligation of the Guarantors, separate from the Developer's obligations under the Area Development Agreement. The Guarantors' obligations to Buona are direct and primary, regardless of the validity of the Area Development Agreement. This ensures that Buona has recourse to the personal assets of the Developer's owners if the business entity fails to perform its duties.
In essence, the Guaranty provides Buona with an additional layer of security, ensuring that there are individuals personally invested in the success and compliance of the Area Development Agreement. This is a common practice in franchising, as it mitigates the risk of the business entity failing to meet its obligations, leaving the franchisor with limited recourse.