Does the failure of the franchisee to pay its debts affect the guarantor's liability to Floyds 99?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
which shall be continuing and irrevocable during the term of the Agreement, including renewals thereof; and
Such liability shall not be diminished, relieved or otherwise affected by the occurrence of any of the following events: (a) the commencement by the Franchisee 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 the Franchisee to the appointment of or taking possession by a receiver, liquidator, assignee, trustee or custodian of the Franchisee or for any substantial part of the assets of the Franchisee, (c) any assignment by the Franchisee for the benefit of creditors, (d) the failure of the Franchisee generally to pay its debts as such debts become due, (e) the taking of corporate action by the Franchisee 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 the Franchisee in any involuntary case under the Bankruptcy Laws, or appointing a receiver, liquidator, assignee, custodian or trustee of the Franchisee 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 the Franchisor under or related to the Agreement for which the Franchisor is required to reimburse the Franchisee 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 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, the guarantor's liability is not diminished if the franchisee fails to pay its debts. The guarantor's liability remains intact even if the franchisee commences a voluntary case under federal bankruptcy laws, consents to the appointment of a receiver, makes an assignment for the benefit of creditors, fails to pay debts as they become due, takes corporate action furthering any of these events, or faces a court decree for relief under bankruptcy laws.
This means that if a Floyds 99 franchisee experiences financial difficulties and cannot meet their debt obligations, the guarantor remains fully responsible for fulfilling the financial obligations outlined in the franchise agreement. This protection extends to Floyds 99 even if the franchisee declares bankruptcy or undergoes other insolvency proceedings.
Furthermore, the guarantor's liability is not affected by any payments made to Floyds 99 that Floyds 99 is later required to reimburse due to a court order or settlement in a bankruptcy or debtor relief proceeding. This clause ensures that Floyds 99 can still pursue the guarantor for any outstanding debts, regardless of any financial restructuring or legal challenges the franchisee may face. The guarantor's obligations remain firm and are not easily discharged or reduced due to the franchisee's financial instability.