What happens if a guarantor of the City Wide Franchise Agreement defaults?
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.
SECTION 2. Guaranty Absolute. Spousal Guarantor guarantees that the Obligations will be paid strictly in accordance with the terms of the Franchise Agreement, regardless of any law, regulation, or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of CITY WIDE with respect thereto. The liability of Spousal Guarantor under this Guaranty is absolute and unconditional irrespective of:
- (i) Any lack of validity or enforceability of the Franchise Agreement or any other agreement or instrument relating thereto;
- (ii) Any change in the time, manner, or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of, or any consent to departure from, the Franchise Agreement;
- (iii) Any exchange, release, or non-perfection of any collateral, or any release or amendment or waiver of, or consent to departure from, any other guaranty for all or any of the Obligations; or
- (iv) Any other circumstance which might otherwise constitute a defense available to, or a discharge of, Franchisee or Spousal Guarantor.
This Guaranty will continue to be effective, or be reinstated, if at any time any payment of the Obligations is rescinded or must otherwise be returned by CITY WIDE upon the insolvency, bankruptcy, or reorganization of Franchisee or otherwise, all as though such payment had not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.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to the 2025 City Wide Franchise Disclosure Document, a guarantor's responsibility is to ensure the franchisee's obligations are met. The guarantor unconditionally guarantees the punctual payment of all the franchisee's obligations under the Franchise Agreement, including fees, expenses, and interest. The guarantor also agrees to cover any expenses City Wide incurs while enforcing its rights under the guaranty.
The guarantor's liability is absolute and unconditional, irrespective of the validity or enforceability of the Franchise Agreement, changes to payment terms, or the release of any collateral. The guaranty remains effective even if any payment of the franchisee's obligations is rescinded due to insolvency or bankruptcy, as if the payment had never occurred. This means the guarantor's obligation to City Wide remains in full force regardless of the franchisee's financial situation.
This section of the FDD highlights the importance of understanding the full extent of the guarantor's obligations before signing the Franchise Agreement. A prospective franchisee should carefully consider the financial implications and potential risks associated with acting as a guarantor, as their personal assets may be at stake if the franchisee fails to meet their financial obligations to City Wide.