Under what condition is the Guarantor prohibited from selling, leasing, assigning, encumbering, or transferring their assets without prior written consent from Buona?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 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 Franchisee'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; and (f) Guarantor has established adequate means of obtaining from Franchisee, on a continuing basis, information regarding Franchisee's financial condition.
Guarantor agrees to keep adequately informed of any facts, events or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information from Guarantor, Franchisor shall have no obligation to disclose to Guarantor any information or documents acquired by Franchisor in the course of its relationship with Franchisee.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a Guarantor is restricted from selling, leasing, assigning, encumbering, hypothecating, transferring, or otherwise disposing of all or substantially all of their assets, or any interest therein, without obtaining prior written consent from Buona. This restriction applies if such an event would have a materially negative effect on the Guarantor's ability to fulfill their obligations under the Guaranty or the Franchise Agreement.
This provision ensures that the Guarantor maintains sufficient financial capacity to cover the franchisee's obligations to Buona. The requirement for prior written consent allows Buona to assess whether the proposed transaction would impair the Guarantor's ability to meet their financial commitments. This is a standard practice in franchising, as franchisors typically require guarantors to maintain a certain level of financial stability to protect their interests.
The Guarantor is also responsible for staying informed about any facts, events, or circumstances that could affect their risks under the Guaranty. However, Buona is not obligated to disclose any information or documents acquired during their relationship with the franchisee to the Guarantor unless the Guarantor specifically requests it. This places the onus on the Guarantor to actively monitor the franchisee's financial condition and any potential risks to their obligations under the guaranty.
In practical terms, this means that if a Guarantor intends to make any significant changes to their asset holdings, they must first seek approval from Buona. This could include selling a major asset, taking out a significant loan secured by their assets, or any other transaction that could reduce their net worth. Failure to obtain prior written consent could result in a breach of the Guaranty and potential legal consequences.