Are there any circumstances under which the Guaranty for City Wide franchises would be considered invalid?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
et forth, and in hereby agree, 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.
This Guaranty will continue to be effective or be reinstated, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by CITY WIDE upon the insolvency, bankruptcy or reorganization of Franchisee or otherwise, all as though such payment had not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.
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.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the Guaranty is designed to be absolute and unconditional, limiting the circumstances under which it could be considered invalid. The standard Guaranty signed by partners, shareholders, officers, and directors states that their liability will be absolute and unconditional, irrespective of factors such as the validity or enforceability of the Franchise Agreement, changes to payment terms, or release of collateral. This means that even if the Franchise Agreement itself faces challenges, the Guarantors' obligations to ensure the franchisee's debts are paid remain in effect.
Similarly, the Spousal Guaranty also emphasizes the absolute and unconditional nature of the guarantee. The spouse's guarantee ensures the franchisee's obligations are met, regardless of the validity of the franchise agreement, changes in payment terms, or release of collateral. This reinforces that the spousal guarantor's commitment is independent of potential issues affecting the franchisee or the franchise agreement itself.
Both the standard Guaranty and Spousal Guaranty include clauses that ensure the guarantee remains effective even if payments are rescinded due to insolvency, bankruptcy, or reorganization of the franchisee. This means that if City Wide has to return payments received from the franchisee due to financial difficulties, the guarantors' obligations are reinstated as if those payments had never been made. This protects City Wide from potential losses in the event of franchisee financial instability.
Furthermore, the guarantors waive certain rights, including the right to receive notices regarding the obligations and any requirement for City Wide to protect or secure any security interest. This waiver streamlines the process for City Wide to enforce the Guaranty without being hindered by procedural requirements. However, the FDD does not explicitly state any conditions under which the Guaranty would be considered invalid. A prospective franchisee should consult with legal counsel to fully understand the implications of the Guaranty and any potential defenses that might exist under applicable law.