Who does Schedule C bind, besides the original parties, for a Coffee News franchise?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, Schedule C, specifically the Guaranty of Performance, binds not only Coffee News USA, Inc. and the franchisee/debtor but also individuals who own 5% or more of the debtor entity, if the franchisee is a corporation, professional corporation, partnership, limited liability partnership, or limited liability company. These individuals unconditionally guarantee the full performance of all obligations of the debtor. This ensures Coffee News has recourse to the personal assets of the owners should the franchisee entity fail to meet its obligations.
This guaranty extends to the debtor's successors and assigns, meaning that if the Coffee News franchise is transferred or assigned, the obligations under Schedule C continue to apply to the new entity. The guaranty remains valid even if Coffee News grants indulgences to the debtor or if the debtor is relieved of obligations due to legal reasons, including bankruptcy proceedings. The guarantors waive any notice, protest, or demand related to the acceptance of the Guaranty, as well as suretyship defenses.
For a prospective Coffee News franchisee, this means that if the franchise is owned by a business entity, individuals with a significant ownership stake (5% or more) must personally guarantee the franchise's performance. This is a common practice in franchising, as it provides the franchisor with an additional layer of security and ensures that the owners are personally invested in the success of the franchise. Franchisees should carefully consider the implications of this personal guarantee and seek legal advice to fully understand their obligations.