What is the significance of the term 'severally' in the Cinnaholic Guaranty Agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
| In consideration | of, | and as | an | inducement to, | the execution | by | CINNAHOLIC | FRANCHISING, | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LLC | ("Franchisor") | of | that | certain | CINNAHOLIC | FRANCHISING, | LLC | Market | Development | ||||
| Agreement, | dated | , | 20 | (as the same | from time to | time may | be | amended or | modified, | the | |||
| "Development | Agreement"), | by | and | between | ("Developer") | and | |||||||
| Franchisor, | |||||||||||||
| the | |||||||||||||
| undersigned, | |||||||||||||
| for | |||||||||||||
| the | |||||||||||||
| term | |||||||||||||
| of | |||||||||||||
| the | |||||||||||||
| Development | |||||||||||||
| Agreement, | |||||||||||||
| and | |||||||||||||
| thereafter | |||||||||||||
| until | |||||||||||||
| all | |||||||||||||
| obligations | |||||||||||||
| of | Developer | ||||||||||||
| to | |||||||||||||
| Franchisor | |||||||||||||
| have | |||||||||||||
| been | |||||||||||||
| satisfied, | |||||||||||||
| jointly | |||||||||||||
| and | |||||||||||||
| severally, | |||||||||||||
| do | |||||||||||||
| hereby | |||||||||||||
| personally, | |||||||||||||
| absolutely, and | |||||||||||||
| unconditionally guarantee that Developer shall punctually pay and perform each and every undertaking, | |||||||||||||
| condition, and covenant set forth in the Development Agreement. |
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, the term 'severally' within the Guaranty Agreement has significant implications for anyone signing the agreement. The inclusion of 'jointly and severally' means that each guarantor is individually liable for the full extent of the franchisee's obligations to Cinnaholic. This holds true until all obligations are completely satisfied.
In practical terms, Cinnaholic can pursue any one guarantor for the entire debt or obligation, regardless of whether other guarantors exist or what their individual financial situations may be. This differs from 'joint' liability, where each party is only responsible for a proportional share. The guarantor's liability is direct and immediate, and Cinnaholic is not required to first pursue the franchisee or any other guarantor before seeking payment or performance from a specific guarantor.
Furthermore, the guarantor's obligations are not contingent upon Cinnaholic pursuing other remedies against the franchisee. The liability remains even if Cinnaholic grants extensions of time, credit, or other indulgences to the franchisee. The guaranty remains in effect throughout the term of the Franchise Agreement, including any renewals or extensions, and is not affected by events such as assignment of the agreement or release of other guarantors.
This aspect of the Cinnaholic Guaranty Agreement is a critical point for potential guarantors to understand. It represents a significant financial risk, as the guarantor could be held responsible for the entire financial burden of the franchise if the franchisee defaults. Prospective guarantors should seek legal counsel to fully understand the implications before signing the agreement.