Does the Cinnaholic Guaranty Agreement remain in effect even if the Franchisee enters bankruptcy?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Until all obligations of Franchisee to Franchisor have been satisfied, the obligations of the undersigned under this Guaranty shall remain in full force and effect without regard to, and shall not be released, discharged or in any way modified or affected by, any circumstance or condition (whether or not the undersigned shall have any knowledge or notice thereof), including, without limitation, any bankruptcy, insolvency, reorganization, composition, liquidation or similar proceeding, with respect to Franchisee or its properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding. Each of the undersigned specifically waives any rights that may be conferred upon the undersigned as a guarantor or surety under the applicable law of any state. The remedies provided herein shall be nonexclusive and cumulative of all other rights, powers and remedies provided under the Franchise Agreement or by law or in equity.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the obligations under the Guaranty Agreement remain in full effect, even in the event of bankruptcy. The guarantor's obligations are not released, discharged, or modified by any circumstance, including bankruptcy, insolvency, reorganization, or liquidation proceedings related to the franchisee or their assets. This means that even if the Cinnaholic franchisee faces financial difficulties and declares bankruptcy, the guarantor is still responsible for fulfilling the obligations outlined in the Guaranty Agreement.
Furthermore, the guarantor specifically waives any rights that might be conferred to them as a guarantor or surety under state law. This waiver reinforces the guarantor's commitment to fulfill the franchisee's obligations, regardless of any legal protections that might otherwise be available. The franchisor's remedies under the Guaranty Agreement are nonexclusive and cumulative, meaning Cinnaholic can pursue all available rights and remedies under the Franchise Agreement, law, or equity.
This clause protects Cinnaholic by ensuring that a responsible party remains liable for the franchisee's financial obligations, even if the franchisee's business fails. Prospective Cinnaholic franchisees should carefully consider the implications of the Guaranty Agreement and ensure that any guarantor fully understands the extent of their financial commitment and the waiver of rights.