Under the Buona Guaranty, who is responsible for the cost of curing a default?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
hat _____________ ("Franchisee") shall punctually pay and perform in full each and every
undertaking, agreement and covenant set forth in the Franchise Agreement;
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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;
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- 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.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the guarantor is responsible for covering the costs associated with curing a default. Specifically, if a default occurs under the Franchise Agreement, the guarantor is obligated to take immediate action to resolve the default, and they must bear the entire financial burden of doing so. This obligation is outlined in the Guaranty, which is a separate and independent agreement from the Franchise Agreement itself.
This means that if a Buona franchisee fails to meet their obligations, such as making payments or adhering to operational standards, the guarantor is legally bound to step in and rectify the situation at their own expense. This could involve paying outstanding debts, rectifying any breaches of contract, or taking other necessary steps to bring the franchise into compliance. The guarantor's responsibility is direct and primary, meaning Buona can pursue the guarantor without first seeking recourse from the franchisee.
Furthermore, the Guaranty extends to cover any work Buona undertakes to rectify issues related to the franchise. Buona has the option to perform any work related to the franchise business and pay any costs associated with that work on behalf of the guarantor. The guarantor is then obligated to promptly reimburse Buona for all expenses incurred, along with interest. The interest rate is the lesser of 1.5% per month or the highest rate permitted by law. This ensures that Buona is compensated for its efforts and expenses in curing the default.
This arrangement provides Buona with a significant level of financial security, as it has recourse to the guarantor's assets in the event of a franchisee default. For a prospective franchisee, it is crucial to understand the implications of the Guaranty and the potential financial obligations it places on the guarantor. Franchisees should carefully consider the risks and ensure that the guarantor is fully aware of their responsibilities before entering into the agreement.