What happens to the Cinnaholic Guaranty Agreement if the Franchisee's properties are subject to a liquidation proceeding?
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 of the guarantor under the Guaranty Agreement remain in full force and effect, even if the franchisee's properties are subject to a liquidation proceeding. This means that the guarantor's obligations are not released, discharged, or modified in any way due to the liquidation. The guarantor also waives any rights they might have as a guarantor or surety under state law.
This provision protects Cinnaholic by ensuring that the guarantor remains responsible for the franchisee's obligations, even if the franchisee is facing financial difficulties. It also allows Cinnaholic to pursue remedies against the guarantor without being hindered by bankruptcy or liquidation proceedings involving the franchisee. This is a standard practice in franchising, as it provides an additional layer of security for the franchisor.
For a prospective Cinnaholic franchisee, this means that anyone signing a Guaranty Agreement on their behalf should be fully aware of the potential financial risks. Even if the franchisee's business fails and enters liquidation, the guarantor will still be liable for the franchisee's debts to Cinnaholic. It is crucial for guarantors to understand the full extent of their obligations and seek legal advice if necessary.