Does the Cool Binz franchise agreement specify any conditions under which the personal guaranty might be released or terminated?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
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- in the case of an installment sale, a transaction where Franchisee provides financing to transferee, transferee pays Franchisee via a promissory note or other structured payment plan, Franchisee must continue to guarantee performance and all payment obligations to Franchisor under this Agreement until the final closing of the installment sale or final payment of such structured payment arrangement;
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- if you finance any part of the sale price of the transferred interest, then (a) you agree and will assure that all of the transferee's obligations under any promissory notes or agreements are subordinate to the transferee's obligation to pay Royalties, Brand Marketing Fees, and other amounts due to us and otherwise to comply with this Agreement, (b) you will not hold any security interest reserved in the business, and (c) you will enter into a comfort letter assuring us that the transferee will meet its obligations under the Franchise Agreement, and reaffirming your guaranty of the Franchise Agreement;
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
The 2025 Cool Binz Franchise Disclosure Document (FDD) outlines conditions related to personal guarantees in the context of franchise transfers. Specifically, if a franchisee finances any part of the sale price to a transferee, the franchisee must ensure the transferee's obligations are subordinate to their obligations to Cool Binz, and the franchisee must reaffirm their guaranty of the Franchise Agreement. This implies the personal guarantee remains in effect during such financing arrangements.
Additionally, in the case of an installment sale where the franchisee provides financing to the transferee, the franchisee must continue to guarantee performance and all payment obligations to Cool Binz until the final closing of the installment sale or final payment of such structured payment arrangement. This indicates that the personal guarantee is not released until the financial obligations are completely satisfied in these scenarios.
Furthermore, the FDD states that when transferring a franchise, the franchisor may require the transferee to sign a personal guaranty. The FDD does not explicitly state conditions for the release or termination of the personal guaranty outside of these transfer-related scenarios. A prospective franchisee should seek clarification from Cool Binz regarding specific conditions or circumstances under which a personal guarantee might be released or terminated during the term of the franchise agreement.