How does the Exit bankruptcy history (Item 4) relate to the franchisee's obligations regarding financial investments (Item 7)?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Guarantor's obligations under this Guaranty shall be binding upon Guarantor and its respective successors and assigns and shall remain in full force and effect irrespective of:
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- The validity or enforceability of the Franchise Agreement;
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- Any failure or lack of diligence in collection of any amounts due under the terms of the Franchise Agreement;
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- The acceptance of any security or other guaranty, the extension of any credit or amendments, modifications, consents or waivers with respect to the Franchise Agreement;
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- Any defense that the Franchisee or any other person or entity might have by reason of any action in bankruptcy or other statutory or common law proceedings for debtor relief by Franchisee or any other Guarantor;
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- Any legal or equitable principle of marshaling or other rule of law requiring a creditor to proceed against specific property, apply proceeds in a particular manner or otherwise exercise remedies so as to preserve the several estates of joint obligors or common debtors; and
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- Any act or failure to act with regard to the Franchise Agreement which might vary the risk of the undersigned.
Subfranchisor shall have no obligation to resort in any manner or form for payment from Franchisee or to any other person, firm or entity, their properties or assets or to any security, property or other rights or remedies whatsoever and Franchisor shall have the right to enforce this Guaranty irrespective of whether or not proceedings or steps are pending seeking to resort to or realization on or upon any of the foregoing remedies.
Guarantor agrees to pay Subfranchisor and EXIT and their respective subsidiaries and affiliates, upon demand, all legal and other costs, expenses and fees at any time paid or incurred by each of them in endeavoring to collect any amounts due pursuant to the Franchise Agreement or to
realize upon this Guaranty or to enforce any right under the Franchise Agreement or this Guaranty. This Guaranty is a guaranty of performance and payment and not a guaranty of collection.
What This Means (2025 FDD)
Based on the 2025 FDD, the guarantor's obligations to Exit remain in full effect regardless of any bankruptcy proceedings initiated by the franchisee. This means that even if the franchisee declares bankruptcy, the guarantor is still responsible for fulfilling the financial obligations outlined in the Franchise Agreement. This obligation extends to the validity and enforceability of the Franchise Agreement, the collection of amounts due, and any defenses the franchisee might have due to bankruptcy proceedings.
This condition protects Exit by ensuring that financial commitments are honored even in cases of franchisee insolvency. The guarantor cannot use the franchisee's bankruptcy as a reason to avoid their financial responsibilities to Exit. This shifts the risk of franchisee financial distress onto the guarantor, who must then ensure Exit is compensated for any losses.
Furthermore, Exit has the right to enforce the guaranty irrespective of any pending proceedings related to the franchisee's assets or remedies. The guarantor is also responsible for covering all legal and other costs incurred by Exit in its efforts to collect amounts due under the Franchise Agreement or to enforce the guaranty. This underscores that the guaranty is one of performance and payment, not merely of collection, meaning Exit does not have to first exhaust all options with the franchisee before pursuing the guarantor.