Under the Carbones Pizzeria Guaranty, does a bankruptcy of the Carbones Pizzeria Franchisee release the guarantor from their obligations?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
The undersigned further understand and agree that no bankruptcy or reorganization of Franchisee shall release or otherwise affect the obligations of the undersigned to pay all costs and fees provided for in all agreements between Franchisee and Franchisor or its affiliates, or otherwise owing to Franchisor or its affiliates, and to perform all the provisions of such agreements, as well as all manuals and operating procedures of Franchisor's business system, nor does the same release the undersigned from being individually bound to perform all covenants, obligations, and commitments of Franchisee contained in the Franchise Agreement or any other agreement to the same extent as if each of the undersigned had individually executed the Franchise Agreement and such other agreements.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the bankruptcy or reorganization of a franchisee does not release the guarantor from their obligations under the Guaranty. The guarantor remains responsible for all costs and fees owed to Carbones Pizzeria or its affiliates, as well as the performance of all provisions within the agreements, manuals, and operating procedures of the Carbones Pizzeria business system.
Specifically, the guarantor remains individually bound to perform all covenants, obligations, and commitments of the franchisee contained in the Franchise Agreement or any other agreement, as if the guarantor had individually executed those agreements. This means that even if the franchisee declares bankruptcy, the guarantor is still legally obligated to fulfill the financial and operational responsibilities outlined in the franchise agreement.
This provision protects Carbones Pizzeria by ensuring that there is a party responsible for the franchise's obligations even in the event of the franchisee's financial distress. For a potential guarantor, this signifies a substantial risk, as they could be held liable for significant debts and operational requirements if the franchisee's business fails and enters bankruptcy. It is common practice in franchising to have a guarantor, but the extent of the guarantor's obligations can vary, so it is important to understand the specific terms of the guaranty agreement.