What is the purpose of the Guaranty of Performance related to a Coffee News franchise agreement?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
OF PERFORMANCE**
(To Be Executed by Principal Stockholder(s) If Franchisee/Debtor is a Corporation, professional corporation, partnership, limited liability partnership, limited liability company)
FOR VALUE RECEIVED, and in consideration for, and as in inducement to Coffee News USA, Inc. as the Holder to make the foregoing Schedule B / C to Coffee News Franchise [name of the Franchisee/Debtor], as the Debtor Agreement with (the "Schedule B"), the undersigned, who each own 5% or more of the Debtor, unconditionally guarantee the full performance of all the covenants, conditions and agreements therein provided to be performed and observed by the Debtor and the Debtor's successors and assigns pursuant to the Schedule B / C and the Promissory Note contained therein, and expressly agrees that the validity of this Guaranty of Performance and the obligations of the guarantor(s) hereunder shall not be terminated, affected or impaired by reason of the granting by Holder of any indulgences to Debtor or by reason of the assertion by Holder against Debtor of any of the rights or remedies reserved to Holder pursuant to the provisions of the Schedule B / C or by the relief of Debtor from any of Debtor's obligations under said Schedule B / C by operation of law or otherwise (including without implied limitation, the rejection or assignment of the Schedule B / C and/or the Promissory Note) in connection with proceedings under bankruptcy laws now or hereafter enacted), irrespective of Holder's consent or other action or inaction with respect to such relief, the undersigned hereby waiving notice, protest, demand of the acceptance of this Guaranty all suretyship defenses and all defenses in the nature thereof.
The undersigned further covenants and agrees that this Guaranty shall continue in full force and effect as to any modification or extension of the Schedule B / C, whether or not the undersigned shall have received any notice of or consented to such modification or extension.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, the Guaranty of Performance is a legally binding agreement designed to ensure that the obligations of a Coffee News franchisee are met. This guaranty is typically executed by principal stockholders who own 5% or more of the franchisee's business, especially if the franchisee is a corporation, professional corporation, partnership, limited liability partnership, or limited liability company. By signing this guaranty, these individuals unconditionally guarantee the full performance of all covenants, conditions, and agreements outlined in the franchise agreement and any associated promissory notes. This provides Coffee News USA, Inc. with an additional layer of security, ensuring that the franchisee adheres to the terms of the agreement.
The guaranty remains valid regardless of any leniency Coffee News extends to the franchisee or any legal changes affecting the franchisee's obligations, including bankruptcy proceedings. The guarantor waives any rights to notice, protest, or demands related to the acceptance of the guaranty, as well as any suretyship defenses. This means that the guarantor's obligations are direct and immediate, without the need for Coffee News to first pursue the franchisee. The guarantor is essentially stepping in to ensure the franchisee's responsibilities are fulfilled, thereby mitigating the risk for Coffee News.
For a prospective Coffee News franchisee, especially those structured as corporations or partnerships, understanding the implications of the Guaranty of Performance is crucial. It means that the personal assets of the principal stockholders could be at risk if the franchise fails to meet its obligations. Franchisees should carefully review the terms of the guaranty with legal counsel to fully understand their exposure and responsibilities. This requirement is a common practice in franchising, as it provides franchisors with added financial security and encourages franchisees to operate their businesses responsibly. The FDD states that the undersigned acknowledges receipt of the Guaranty of Performance, which is incorporated as part of Schedule B by reference.