Does the consent by Developer to the appointment of a receiver affect the liability under the Floyds 99 Guaranty?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
bankruptcy, insolvency or other similar law (collectively, the "Bankruptcy Laws"), (b) the consent by Developer to the appointment of or taking possession by a receiver, liquidator, assignee, trustee or custodian of Developer or for any substantial part of the assets of Developer, (c) any assignment by Developer for the benefit of creditors, (d) the failure of Developer generally to pay its debts as such debts become due, (e) the taking of corporate action by Developer in the furtherance of any of the foregoing, or (f) the entry of a decree or order for relief by a court having jurisdiction in respect of Developer in any involuntary case under the Bankruptcy Laws, or appointing a receiver, liquidator, assignee, custodian or trustee of Developer or for any substantial part of its assets, or ordering the winding-up or liquidation of any of its affairs and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days. In addition, such liability shall not be affected or impaired by any payment made to Franchisor under or related to the Agreement for which Franchisor is required to reimburse Developer pursuant to any court order or in settlement of any dispute, controversy or litigation in any bankruptcy, reorganization, arrangement, moratorium or other federal or state debtor relief proceeding.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, the consent by the Developer to the appointment of a receiver does not diminish, relieve, or otherwise affect the liability under the Floyds 99 Guaranty. This means that even if the Developer agrees to the appointment of a receiver, liquidator, assignee, or trustee for their assets due to financial difficulties, the personal guarantors are still responsible for fulfilling the obligations under the guaranty.
This provision protects Floyds 99 in situations where a franchisee's business faces financial distress. The guaranty ensures that Floyds 99 can still seek recourse from the personal guarantors for any outstanding debts or unfulfilled obligations, regardless of the franchisee's insolvency or restructuring. This is a standard practice in franchising, as it provides an additional layer of financial security for the franchisor.
For a prospective Floyds 99 franchisee, this clause highlights the importance of understanding the full extent of the personal financial commitment involved in signing a guaranty. Even if the franchisee's business encounters financial problems leading to receivership, the personal guarantors remain liable. Therefore, potential franchisees should carefully assess their financial capacity and risk tolerance before agreeing to such terms.