Under the Chatime agreement, what obligations does the Guarantor have to the Franchisor regarding the Developer's performance?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Guarantor unconditionally and irrevocably guarantees to Franchisor prompt performance of all of the obligations of Developer contained or implied in this Agreement. If the obligation is to pay money, Franchisor may recover the money from Guarantor as a liquidated debt.
16.4 Indemnity
- (1) If Developer 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 16.3 had Developer been bound.
- (2) Guarantor indemnifies Franchisor and agrees to hold it harmless in respect of any failure by Developer to perform any of its obligations under this Agreement including any obligation to pay money to Franchisor.
16.5 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.
16.6 Matters Not Affecting Guarantor's Liability
Guarantor's liability under this clause 16 is not affected by:
(1) The granting of time, forbearance, or other concession by Franchisor to Developer or any Guarantor;
(2) An absolute or partial release of Developer or any Guarantor or a compromise with Developer or any Guarantor;
(3) A variation of this Agreement;
(4) A transfer of this Agreement by Developer;
(5) The termination of this Agreement;
(6) Any disputes or differences between Developer 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 Guarantors; or
(9) The exercise or purported exercise by Franchisor of its rights under this Agreement.
16.7 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 the 2025 Chatime Franchise Disclosure Document, the Guarantor plays a crucial role in ensuring the Developer fulfills their obligations. The Guarantor's responsibilities are defined within the guarantee and indemnity clauses of the agreement. Specifically, the Guarantor guarantees the prompt performance of all the Developer's obligations. If the Developer is obligated to pay money to Chatime, the franchisor can recover that money directly from the Guarantor as a liquidated debt.
Furthermore, the Guarantor provides an indemnity to Chatime, agreeing to cover any failures by the Developer to meet their obligations, including financial obligations. This indemnity serves as a protection for Chatime against potential losses resulting from the Developer's non-performance. This guarantee is a continuing security and remains in full force until Chatime provides a final release, regardless of any settlements of accounts.
The Guarantor's liability remains intact under various circumstances, such as Chatime granting time or concessions to the Developer, any release or compromise involving the Developer, variations or transfers of the agreement, termination of the agreement, or disputes between the Developer and Chatime. The Guarantor's obligations are not affected even if the agreement is wholly or partially void or unenforceable, or if other Guarantors do not execute the agreement. Even if a payment made by the Guarantor is later avoided by law, the Guarantor's liability is not discharged, and the parties are restored to their original rights and obligations.
In essence, the Guarantor acts as a safeguard for Chatime, ensuring that the Developer's obligations are met, regardless of various potential issues or changes in circumstances. This arrangement provides Chatime with a higher level of security and recourse in case the Developer fails to perform as required under the franchise agreement.