Does the Guaranty obligate the guarantors to pay interest on late payments to City Wide?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
WHEREAS, CITY WIDE desires to accept such guarantee.
NOW, THEREFORE, in consideration of the covenants and conditions herein set forth, and in order to induce CITY WIDE to enter into the Franchise Agreement, the Spousal Guarantor hereby agrees as follows:
SECTION 1. Guaranty. Spousal Guarantor hereby unconditionally guarantees the punctual payment when due, whether at stated maturity, by acceleration, or otherwise, of all obligations of Franchisee now or hereafter existing under the Franchise Agreement, whether for fees, expenses, interest, or otherwise (collectively, "Obligations"), and agrees to pay any and all expenses (including attorney fees and expenses) incurred by CITY WIDE in enforcing any rights under this Guaranty, except to the extent limited by Section 5 below.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the Guaranty does obligate guarantors to pay interest on late payments. Specifically, both the standard Guaranty and the Spousal Guaranty included in the Franchise Agreement stipulate that the guarantor is responsible for the franchisee's obligations, which include fees, expenses, and interest. This obligation extends to all debts arising under the Franchise Agreement. The guarantor's responsibility is unconditional, irrespective of any modifications to the payment terms or the enforceability of the Franchise Agreement itself. This means that even if the Franchise Agreement is altered or becomes difficult to enforce, the guarantor remains liable for the franchisee's debts, including any accrued interest.
The Guaranty also includes a waiver of certain rights that the guarantor might otherwise have. This waiver includes any requirement that City Wide take action against the franchisee or any collateral before pursuing the guarantor. The guarantor also waives any rights to seek reimbursement from the franchisee or other guarantors for any payments made under the Guaranty until all obligations are fully satisfied. This waiver strengthens City Wide's position by allowing them to pursue the guarantor directly without first exhausting other remedies.
For a prospective City Wide franchisee, this means that anyone acting as a guarantor, such as a spouse or business partner, must understand the full extent of their financial responsibility. They are not only guaranteeing the principal amount of the debt but also any interest, fees, and expenses associated with it. Furthermore, they are giving up certain legal rights that could otherwise protect them from liability. It is crucial for potential guarantors to carefully review the Guaranty and understand its implications before signing, as their personal assets could be at risk if the franchisee defaults on their obligations to City Wide.