Does the Guaranty for City Wide franchises include a waiver of subrogation?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
ligations is rescinded or must otherwise be returned by CITY WIDE upon the insolvency, bankruptcy or reorganization of Franchisee or otherwise, all as though such payment had not been made.
SECTION 3. Waiver. Guarantors hereby waive promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that CITY WIDE
protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against Franchisee or any other person or entity or any collateral.
SECTION 4. Waiver of Subrogation. Notwithstanding anything to the contrary in this Guaranty, Guarantors hereby irrevocably waive all rights they may have at law or in equity, to the extent that such rights may interfere with any claim or demand by CITY WIDE under the Franchise Agreement or this Guaranty (including, without limitation, any law subrogating the Guarantors to the rights of CITY WIDE), to seek contribution, indemnification, or any other form of reimbursement from Franchisee, any other Guarantor, or any other person now or hereafter primarily or secondarily liable for any obligations of Franchisee to CITY WIDE, for any disbursement made by the Guarantors under or in connection with this Guaranty or otherwise. If (i) Guarantors will make payment to CITY WIDE of all or any part of the Obligations and (ii) all the Obligations will be paid in full, CITY WIDE will, at Guarantors' request, execute and deliver to Guarantors appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantors of an interest in the Obligations resulting from such payment by Guarantors.
SECTION 5. Amendments, Etc. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantors therefrom will in any event be effective unless the same will be in writing and signed by CITY WIDE, and then such waiver or consent will be effective only in the specific instance and for the specific purpose for which given.
SECTION 6. No Waiver; Remedies. No failure on the part of CITY WIDE to exercise, and no delay in exercising any right hereunder will operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, both the standard Guaranty and the Spousal Guaranty include a waiver of subrogation. This waiver means that the Guarantors (those who guarantee the franchisee's obligations) irrevocably give up rights that could interfere with City Wide's claims or demands under the Franchise Agreement or the Guaranty itself. This includes any rights they might have under laws that would subrogate them to City Wide's rights. Subrogation is a legal doctrine where one party steps into the shoes of another party to claim their rights.
In practical terms, the waiver prevents the Guarantors from seeking reimbursement from the franchisee, other guarantors, or anyone else liable for the franchisee's obligations to City Wide if the Guarantors make payments to City Wide under the Guaranty. The waiver applies to any form of reimbursement, including contribution or indemnification. However, if the Guarantors pay all the franchisee's obligations in full, City Wide will provide them with documents to evidence the transfer of interest in the obligations resulting from their payment, essentially subrogating them to City Wide's position once all debts are settled.
The FDD specifies that the Spousal Guarantor also waives similar rights. This ensures that neither the primary Guarantors nor the Spousal Guarantors can take actions that would undermine City Wide's ability to recover debts or enforce the Franchise Agreement. This is a fairly standard practice in franchising, as franchisors typically want to ensure that guarantees are as straightforward and enforceable as possible, without potential legal complications arising from subrogation claims.
Prospective City Wide franchisees should carefully review these sections with their legal counsel to fully understand the implications of waiving subrogation rights. It is important to be aware that this waiver could limit their ability to recover funds from other parties in the event they are required to fulfill the franchisee's obligations under the Franchise Agreement.