Does the rejection of the Sublease in bankruptcy affect the Cd One Price Cleaners Guaranty?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — Contracts (FDD page 72)
What This Means (2025 FDD)
According to Cd One Price Cleaners' 2025 Franchise Disclosure Document, the Guaranty is structured to remain in effect even if the Sublease is rejected in bankruptcy proceedings. The Guarantor explicitly agrees that their obligations will not be terminated, affected, diminished, or impaired due to the rejection of the Sublease under bankruptcy laws. This provision ensures that the Sublandlord retains recourse against the Guarantor regardless of the Subtenant's bankruptcy status.
This aspect of the Guaranty is designed to protect the Sublandlord's interests by ensuring continuous financial security. The Guarantor waives rights to be considered a creditor of the Subtenant in bankruptcy, preventing any legal challenges that could delay or reduce payments to the Sublandlord. Furthermore, the Guarantor also waives rights to require the Sublandlord to first pursue the Subtenant or exhaust other security measures before seeking recourse from the Guarantor.
For a prospective Cd One Price Cleaners franchisee, this clause highlights the importance of understanding the full scope of financial obligations when signing a lease agreement that requires a guaranty. The franchisee should recognize that the guaranty is an unconditional commitment that survives even if the business faces financial difficulties leading to bankruptcy. This could place significant personal financial risk on the guarantor.
Cd One Price Cleaners' FDD also states that the Sublandlord can modify the Sublease without notifying the Guarantor, which could potentially increase the Guarantor's obligations without their direct knowledge or consent. The Guarantor also waives any defenses based on circumstances that might otherwise discharge their obligations, except for defenses arising from the Subtenant's due performance of the Sublease terms. This further emphasizes the comprehensive nature of the Guaranty and the limited circumstances under which the Guarantor can be released from their obligations.