Who does Schedule B of the Coffee News franchise agreement bind, besides the parties involved?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The parties agree that neither party may assign or transfer any rights and obligations under this Schedule B, directly or indirectly except upon the prior written consent of the other party. Subject to the foregoing, this Schedule B shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns.
EXHIBIT A TO SCHEDULE B and/or SCHEDULE C
GUARANTY 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.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, Schedule B of the franchise agreement, along with the Promissory Note, binds not only the involved parties but also their successors and assigns. This means that the obligations and benefits outlined in Schedule B can be transferred to another party if the original party assigns their rights, subject to prior written consent from the other party. This is a common practice in franchising, as it allows for the transfer of the franchise to a new owner or entity, while ensuring that the terms of the agreement remain in effect.
Furthermore, if the franchisee/debtor is a corporation, professional corporation, partnership, limited liability partnership, or limited liability company, Schedule B may also bind principal stockholders who own 5% or more of the debtor. These stockholders may be required to execute a Guaranty of Performance, which unconditionally guarantees the full performance of all covenants, conditions, and agreements outlined in Schedule B and the Promissory Note. This ensures that Coffee News has recourse to the personal assets of the principal stockholders if the franchisee fails to meet its obligations.
The Guaranty of Performance also stipulates that the guarantor's obligations will not be affected by any indulgences granted to the debtor, assertion of rights by the holder, or relief of the debtor from obligations under Schedule B, even in cases of bankruptcy. The guarantors waive any notice, protest, demand, acceptance of the Guaranty, suretyship defenses, and other related defenses. This provision is designed to protect Coffee News's interests and ensure that the obligations under Schedule B are fully met, regardless of the franchisee's financial situation or any legal proceedings.
In practical terms, a prospective Coffee News franchisee should carefully review Schedule B and any related documents, such as the Promissory Note and Guaranty of Performance, to fully understand their obligations and potential liabilities. If the franchisee is a business entity, the principal stockholders should be aware that they may be required to personally guarantee the franchisee's performance under the agreement. It is advisable to seek legal counsel to fully understand the implications of these documents before signing the franchise agreement.