Does a Burros Fries guarantor's undertaking change due to bankruptcy of the franchisee?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) This undertaking will continue unchanged by the occurrence of any bankruptcy with respect to Franchisee or any assignee or successor of Franchisee or by an abandonment of the Agreement by a trustee of Franchisee. Neither the Guarantor's obligations to make payment or render performance in accordance with the terms of this undertaking nor any remedy for enforcement shall be impaired, modified, changed, released or limited in any manner whatsoever by impairment, modification, change, release or limitation of the liability of the Franchisee or its estate in bankruptcy or any remedy for enforcement resulting from the operation of any present or future provision of the U.S. Bankruptcy Act or other statute, or from the decision of any court or agency;
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, the guarantor's obligations remain unchanged even if the franchisee declares bankruptcy. The guarantor's liability is direct, immediate, and independent of the franchisee's liability. This means that Burros Fries can pursue the guarantor directly for the franchisee's obligations without first having to take action against the franchisee.
Specifically, the undertaking continues without alteration if the franchisee, or any assignee or successor of the franchisee, experiences bankruptcy. Furthermore, abandonment of the Franchise Agreement by a trustee of the franchisee does not impact the guarantor's obligations. The guarantor's duty to make payments or fulfill performance as required by the undertaking, as well as any enforcement remedies, will not be affected, modified, changed, released, or limited due to any impairment, modification, change, release, or limitation of the franchisee's liability. This also applies to the franchisee's bankruptcy estate or any enforcement remedy resulting from the U.S. Bankruptcy Act, other statutes, or decisions made by any court or agency.
Burros Fries can proceed against the guarantor and franchisee jointly or separately, at its discretion, without initiating any action or obtaining any judgment against the franchisee. The guarantor also waives the defense of the statute of limitations in any action related to the undertaking or the collection of any guaranteed debt or obligation. Additionally, the guarantor is responsible for covering all reasonable attorneys' fees, costs, and other expenses incurred during any collection efforts or negotiations related to the guaranteed obligations, or in enforcing the undertaking against the guarantor.
This arrangement provides Burros Fries with a strong safeguard, ensuring that the financial obligations of the franchise are met regardless of the franchisee's financial status. For a potential Burros Fries franchisee, this highlights the significant responsibility assumed by a guarantor, who remains liable even in situations where the franchisee faces bankruptcy or other financial difficulties.