Does the failure of Developer to pay its debts affect the liability under the Floyds 99 Guaranty?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
Such liability shall not be diminished, relieved or otherwise affected by the occurrence of any of the following events: (a) the commencement by Developer of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended or replaced, or any other applicable federal or state 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 Floyds 99's 2025 Franchise Disclosure Document, the liability under the Guaranty is not affected if the Developer fails to pay its debts. Specifically, the guaranty provided to Floyds 99 by the Developer remains in effect even if the Developer commences a voluntary case under federal bankruptcy laws or any other applicable federal or state bankruptcy, insolvency or other similar law.
Furthermore, the liability under the guaranty is not affected if the Developer consents to the appointment of a receiver, liquidator, assignee, or trustee, or makes an assignment for the benefit of creditors. The guaranty remains valid even if the Developer generally fails to pay debts as they become due, or if corporate action is taken to further any of the aforementioned events.
Additionally, the liability under the guaranty is not affected by the entry of a court order for relief in an involuntary case under bankruptcy laws, or the appointment of a receiver, liquidator, assignee, custodian, or trustee. This protection extends even if such an order remains in effect for 60 consecutive days. The liability also remains intact regardless of any payments made to Floyds 99 that Floyds 99 is later required to reimburse due to a court order or settlement in a debtor relief proceeding.