What does the Guarantor indemnify Chatime for regarding the Franchisee's obligations under the agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
18.4 Indemnity
- (1) If Franchisee is not bound by some or all of its obligations under this Agreement, Guarantor agrees, by way of indemnity and principal obligation, to pay to Franchisor the amount which would have been payable by Guarantor to Franchisor under the guarantee in clause 18.3 had Franchisee been bound.
- (2) Guarantor indemnifies Franchisor and agrees to hold it harmless in respect of any failure by Franchisee to perform any of its obligations under this Agreement including any obligation to pay money to Franchisor.
18.5 Continuing Security
This guarantee and indemnity is a continuing security, and is not discharged or prejudicially affected by any settlement of accounts, but remains in full force until a final release is given by Franchisor.
18.6 Matters Not Affecting Guarantor's Liability
Guarantor's liability under clauses 18.3 and 18.4 is not affected by:
(1) The granting of time, forbearance, or other concession by Franchisor to Franchisee or any Guarantor;
(2) An absolute or partial release of Franchisee or any Guarantor or a compromise with Franchisee or any Guarantor;
(3) A variation of this Agreement;
(4) A transfer of this Agreement by Franchisee;
(5) The termination of this Agreement;
(6) Any disputes or differences between Franchisee and Franchisor;
(7) The fact that this Agreement is wholly or partially void, voidable, or unenforceable;
(8) The non-execution of this Agreement by one or more of the persons named as Guarantor or the unenforceability of the guarantee or indemnity against one or more of Guarantors; or
(9) The exercise or purported exercise by Franchisor of its rights under this Agreement.
18.7 Payment Later Avoided
Guarantor's liability is not discharged by a payment to Franchisor which is later avoided by law. If that happens, the parties are restored to their respective rights and obligations as if the payment had not been made.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the Guarantor provides an indemnity to Chatime, agreeing to hold Chatime harmless if the Franchisee fails to fulfill any obligations under the Franchise Agreement. This includes any monetary obligations the Franchisee owes to Chatime. Essentially, the guarantor is on the hook if the franchisee does not meet their financial or contractual responsibilities.
Specifically, if the Franchisee is not bound by some or all of its obligations under the agreement, the Guarantor is still obligated to pay Chatime the amount that would have been payable had the Franchisee been bound by the agreement. This ensures that Chatime is protected even if the Franchisee's obligations are somehow nullified or unenforceable.
The guarantee and indemnity serve as a continuing security for Chatime, remaining in full force until Chatime issues a final release. This security is not affected by settlements of accounts. Furthermore, the Guarantor's liability is not affected by various factors, including any leniency Chatime grants to the Franchisee, any release or compromise involving the Franchisee, changes to the Franchise Agreement, transfers of the agreement by the Franchisee, or even the termination of the agreement. Disputes between the Franchisee and Chatime also do not impact the Guarantor's obligations.
Even if a payment made to Chatime is later avoided by law, the Guarantor's liability remains. In such cases, the parties are restored to their original rights and obligations as if the payment had never occurred, ensuring Chatime's financial protection. This comprehensive indemnity ensures that Chatime is shielded from potential losses resulting from the Franchisee's failure to meet their obligations, with the Guarantor acting as a financial backstop.