Does the consent by the franchisee to the appointment of a receiver affect the guarantor's liability to Floyds 99?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of, and as an inducement to, the execution of the above Franchise Agreement (the "Agreement") by Floyd's 99 Franchising, LLC (the "Franchisor"), each of the undersigned hereby personally and unconditionally:
Guarantees to the Franchisor and its affiliates and their respective successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that the Franchisee as that term is defined in the Agreement (the "Franchisee") shall punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement; and
Agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement.
Each of the undersigned waives the following:
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- Acceptance and notice of acceptance by the Franchisor and its affiliates of the foregoing undertakings;
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- Notice of demand
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 FDD, if the franchisee consents to the appointment of a receiver, this event can trigger termination of the Franchise Agreement by Floyds 99. Specifically, if the franchisee becomes insolvent, is adjudicated bankrupt, takes action under any insolvency, bankruptcy, or reorganization act, makes an assignment for the benefit of creditors, or has a receiver appointed by them, Floyds 99 has the option to terminate the agreement. This termination can occur without providing the franchisee an opportunity to remedy the situation, although state laws may take precedence where applicable.
In addition, the FDD includes a Guaranty and Assumption of Franchisee's Obligations, where the guarantor personally guarantees the franchisee's obligations to Floyds 99. The guarantor agrees to be personally bound by and liable for any breaches of the Franchise Agreement. The guarantor also waives certain notices, including notice of acceptance by Floyds 99 and its affiliates, and notice of demands.
While the FDD specifies that the guarantor is liable for the franchisee's obligations, it does not explicitly state whether the franchisee's consent to the appointment of a receiver would affect the guarantor's liability. However, given that the appointment of a receiver due to the franchisee's actions can trigger termination of the agreement, it is reasonable to assume that this event could impact the guarantor's obligations, as the guarantor is responsible for ensuring the franchisee complies with the agreement. A prospective franchisee should seek clarification from Floyds 99 on this matter.