Does the Cream Guaranty require the Guarantor to refrain from specific actions?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
-|---|---|---| | Marks, unless we direct you otherwise in connection with our exercise of our option to purchase | | | |
ATTACHMENT D TO FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given by each of the undersigned persons indicated below who have executed this Guaranty (each a "Guarantor") to be effective as of the Effective Date of the Agreement (defined below).
In consideration of, and as an inducement to, the execution of that certain Franchise Agreement (the "Agreement") on this date by Jeni's Splendid Ice Creams Franchise, LLC ("us," "we," or "our"), each Guarantor personally and unconditionally (a) guarantees to us and our successors and assigns, for the term of the Agreement and afterward as provided in the Agreement, that ________________________________________ ("Franchise Owner") will punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Agreement and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the non-competition, confidentiality, and transfer requirements.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the Guarantor is obligated to ensure the Area Developer or Franchise Owner complies with all terms of the agreement, including refraining from specific actions. Specifically, the Guarantor agrees to ensure compliance with both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the non-competition, confidentiality, and transfer requirements outlined in the Franchise Agreement or Area Development Agreement. This means the Guarantor's responsibility extends beyond just financial obligations; they must also ensure the franchisee adheres to all operational and legal requirements of the franchise agreement.
This requirement has significant implications for the Guarantor. They must have a thorough understanding of the franchise agreement and actively monitor the franchisee's compliance. Failure to ensure the franchisee refrains from prohibited actions, such as engaging in competitive activities or breaching confidentiality, could result in the Guarantor being held liable for these breaches. The Guarantor should carefully review the franchise agreement and seek legal counsel to fully understand the scope of their obligations and potential liabilities.
Cream also stipulates that if the Franchise Owner (or any of its affiliates) is delinquent in payment of any amounts guaranteed, each Guarantor that is a business entity, retirement or investment account, or trust acknowledges and agrees that no dividends or distributions may be made by such Guarantor (or on such Guarantor's account) to its owners, accountholders or beneficiaries or otherwise, for so long as such delinquency exists, subject to applicable law. This further restricts the Guarantor from specific actions.