If collateral is released, does it affect the Guarantor's obligations to City Wide?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
for the benefit of Franchisee, its successors and assigns, as follows: | | | | to enter into the Franchise Agreement, the Guarantors, and each of them, | | SECTION 1. | | | Guaranty. Guarantors and each of them hereby unconditionally guarantee the punctual | | | | | now or hereafter existing under the Franchise Agreement, whether for fees, expenses, interest, or otherwise (such obligations being "Obligations"), and agree to pay any and all expenses (including attorney fees and expenses) incurred by CITY WIDE in enforcing any rights under this Guaranty. SECTION 2. Guaranty Absolute. Guarantors and each of them guarantee that the Obligations will be
payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of Franchisee
- 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 the Guarantors under this Guaranty will be 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 a Guarantor.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the guarantor's obligations remain absolute and unconditional, even if collateral is released. Section 2 of the Guaranty agreement states that the liability of the guarantors is not affected by the exchange, release, or non-perfection of any collateral. This means that even if City Wide releases any collateral securing the franchisee's obligations, the guarantor is still fully responsible for those obligations. This condition applies regardless of the validity or enforceability of the Franchise Agreement, changes to payment terms, or any other circumstance that might serve as a defense for the franchisee or guarantor.
The Guaranty also includes waivers that further protect City Wide's interests. The guarantors waive any requirement that City Wide protect, secure, perfect, or insure any security interest or lien on collateral, or take action against the franchisee or any collateral. This waiver reinforces that City Wide has no obligation to maintain or pursue collateral before seeking payment from the guarantor. The guarantor's obligations are primary and not contingent on the status or availability of any collateral.
For a prospective City Wide franchisee, this means that anyone acting as a guarantor (such as a spouse or partner) must understand that their guarantee is absolute. The guarantor cannot rely on the value or existence of any collateral to limit their liability. Even if City Wide releases collateral, the guarantor remains fully liable for the franchisee's obligations. This is a significant commitment and should be carefully considered before signing the Guaranty agreement. Franchisees should ensure that their guarantors fully understand the implications of this clause.