Who is responsible for the costs and expenses incurred in enforcing the terms of the Cream Guaranty?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
The provisions contained in Section 7 (Enforcement) of the Agreement, including Section 7.E (Arbitration), Section 7.G (Consent to Jurisdiction) and Section 7.C (Costs and Attorneys' Fees) of the Agreement are incorporated into this Guaranty by reference and shall govern this Guaranty and any disputes between the Guarantors and us. The Guarantors shall reimburse us for all costs and expenses we incur in connection with enforcing the terms of this Guaranty.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, the Guarantors are responsible for reimbursing Cream for all costs and expenses Cream incurs while enforcing the terms of the Guaranty. This means that if Cream has to take legal action to ensure the Guarantors fulfill their obligations, the Guarantors will have to pay for Cream's legal fees, court costs, and any other associated expenses.
The Guaranty is an agreement where the Guarantor promises to fulfill the obligations of the Area Developer if the Area Developer fails to do so. The Guaranty covers all undertakings, agreements, and covenants set forth in the Area Development Agreement, including monetary obligations and obligations to take or refrain from taking specific actions. This ensures that Cream has recourse to the Guarantor's assets to cover any losses or damages resulting from the Area Developer's non-compliance.
This provision is typical in franchising, as franchisors want to ensure they are protected financially if a franchisee defaults on their obligations. By having the Guarantor cover enforcement costs, Cream reduces its financial risk and ensures that it can pursue legal remedies without incurring additional expenses. Prospective franchisees should carefully review the Guaranty and understand the potential financial implications of this provision, especially if they are acting as a Guarantor themselves.