What is the effect of the Guaranty being 'not of collection' under the Cd One Price Cleaners Guaranty?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
blease, Guarantor will forthwith pay such Rent and such other sums and charges to | | Sublandlord, and any arrears thereof, and shall forthwith faithfully perform and fulfill all of such | | terms, covenants, conditions, and agreements. |
Guarantor further agrees as follows:
- This Guaranty is an absolute, unconditional and irrevocable guaranty of payment and of performance, and not of collection. It shall be enforceable against Guarantor without the necessity of any suit or proceedings on Sublandlord's part of any kind or nature whatsoever against Subtenant and without the necessity of any notice of nonpayment, nonperformance or nonobservance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives; and Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished, or impaired by reason of the assertion or the failure to assert by Sublandlord against Subtenant, or against Subtenant's successors and assigns, any of the rights or remedies reserved to Sublandlord pursuant to the provisions of the Sublease or by relief of Subtenant from any of Subtenant's obligations under the Sublease or otherwise, including, without limitation, the rejection of the Sublease in connection with proceedings under the bankruptcy laws now or hereafter in effect.
-
- The failure of Sublandlord to insist in any one or more instances upon strict performance or observance of any of the terms, provisions, or covenants of the Sublease or to exercise any right therein contained shall not be construed or deemed to be a waiver or relinquishment for the future of such term, provision, covenant or right, but the same shall continue and remain in full force and effect. Receipt by Sublandlord of Rent or other payments with knowledge of the breach of any provision of the Sublease shall not be deemed a waiver of such breach.
-
- Guarantor's liability hereunder shall be primary, and in any right to action which shall accrue to Sublandlord under the Sublease, Sublandlord may, at its option, proceed against the undersigned and Subtenant, jointly and severally, and may proceed against the undersigned without having commenced any action or having obtained any judgment against Subtenant.
-
Source: Item 22 — Contracts (FDD page 72)
What This Means (2025 FDD)
According to the 2025 FDD, the Guaranty associated with the Cd One Price Cleaners franchise agreement is an absolute, unconditional, and irrevocable guarantee of payment and performance, and specifically not of collection. This distinction is significant because it outlines the franchisor's rights and the guarantor's obligations in case of default by the franchisee.
Because the guaranty is 'not of collection', Cd One Price Cleaners can enforce the guaranty against the guarantor without first having to sue or take any action against the franchisee (the primary debtor). The guarantor cannot require Cd One Price Cleaners to first attempt to recover from the franchisee or exhaust any other remedies before pursuing the guarantor. This provides Cd One Price Cleaners with a direct and immediate recourse to the guarantor's assets should the franchisee fail to meet its obligations under the Franchise Agreement.
Furthermore, the guarantor waives any right to require Cd One Price Cleaners to proceed against the franchisee for any payment required under the sublease, exhaust any security from the franchisee, or take any action to assist the guarantor in seeking reimbursement. The guarantor also relinquishes any benefit of or right to participate in any security held by Cd One Price Cleaners. This waiver extends to acceptance and notice of acceptance by Cd One Price Cleaners, as well as any demands or notices related to payment or non-performance. This ensures that the guarantor's obligations remain in full force and effect, regardless of any actions or inactions taken by Cd One Price Cleaners against the franchisee.
In practical terms, this means that if a Cd One Price Cleaners franchisee defaults on their financial or performance obligations, the guarantor is immediately liable for those obligations. This type of guarantee is more favorable to the franchisor as it simplifies and expedites the recovery process in case of a default. Prospective franchisees should carefully consider the implications of this type of guarantee and understand the full extent of their financial exposure before entering into a franchise agreement.