What happens if a person guaranteeing a Cicis franchisee's obligations makes a general assignment for the benefit of creditors?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) you or any Person who guarantees your obligations under this Agreement (i) admits, in writing, your or its insolvency or inability to pay your or its debts as they become due, (ii) makes a general assignment for the benefit of creditors; (iii) files or has filed against you or it a petition under any bankruptcy law, receivership or custodian law, insolvency law, foreclosure law, or any similar Law or statute of the United States or any state thereof intended to protect the rights of your or its creditors; (iv) has a final judgment against you or it that remains unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed); or (v) is dissolved or wound down;
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if a person guaranteeing a franchisee's obligations makes a general assignment for the benefit of creditors, it constitutes a breach of the Franchise Agreement. Specifically, Item 22 outlines various events that can lead to a breach, including such an assignment.
This means that Cicis could take action against the franchisee. While the document does not explicitly state the consequences of breaching the agreement in this specific instance, it generally allows Cicis to pursue remedies outlined in the agreement, which could include termination of the franchise.
Prospective franchisees should carefully consider the implications of having a guarantor and ensure that any potential guarantors are financially stable and understand the obligations they are undertaking. It would be prudent to discuss with Cicis what specific actions they might take if a guarantor makes a general assignment for the benefit of creditors, to fully understand the potential ramifications.