What is the effect of the waiver of subrogation rights in the Cd One Price Cleaners personal guaranty?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the undersigned waives: (i) all rights to payments and claims for reimbursement or subrogation that any of the undersigned may have against Franchisee arising as a result of the undersigned's execution of and performance under this Guaranty, for the express purpose that none of the undersigned shall be deemed a "creditor" of Franchisee under any applicable bankruptcy law with respect to Franchisee's obligations to Franchisor; (ii) all rights to require Franchisor to proceed against Franchisee for any payment required under the Franchise Documents, proceed against or exhaust any security from Franchisee, take any action to assist any of the undersigned in seeking reimbursement or subrogation in connection with this Guaranty or pursue, enforce or exhaust any remedy, including any legal or equitable relief, against Franchisee; (iii) any benefit of, any right to participate in, any security now or hereafter held by Franchisor; and (iv) acceptance and notice of acceptance by Franchisor of his, her or its undertakings under this Guaranty, all presentments, demands and notices of demand for payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest, notices of dishonor, notices of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed, and any other notices and legal or equitable defenses to which he, she or it may be entitled. Franchisor shall have no present or future duty or obligation
Source: Item 22 — Contracts (FDD page 72)
What This Means (2025 FDD)
According to Cd One Price Cleaners' 2025 Franchise Disclosure Document, the personal guaranty requires the guarantor to waive certain rights, including subrogation. Specifically, the guarantor waives all rights to payments and claims for reimbursement or subrogation against the franchisee arising from the guarantor's execution and performance under the guaranty. This waiver is explicitly included to prevent the guarantor from being considered a "creditor" of the franchisee under any applicable bankruptcy law concerning the franchisee's obligations to the franchisor.
In practical terms, this means that if a guarantor makes payments on behalf of a defaulting Cd One Price Cleaners franchisee, the guarantor cannot then step into the shoes of the franchisor to recover those payments from the franchisee through subrogation. The guarantor also gives up the right to seek reimbursement from the franchisee for any amounts paid under the guaranty. This waiver is designed to protect the franchisor's interests in the event of the franchisee's bankruptcy by ensuring that the guarantor's claims do not compete with the franchisor's claims against the franchisee.
Furthermore, the guarantor waives all rights to require the franchisor to take action against the franchisee, proceed against any security from the franchisee, or assist the guarantor in seeking reimbursement or subrogation. The guarantor also relinquishes any benefit of or right to participate in any security held by the franchisor. This comprehensive waiver significantly limits the guarantor's rights and remedies against both the franchisee and the franchisor, increasing the guarantor's risk exposure under the personal guaranty for a Cd One Price Cleaners franchise.