Does the Marble Slab Creamery Guaranty remain in effect if the Franchisee files for bankruptcy?
Marble_Slab_Creamery Franchise · 2025 FDDAnswer from 2025 FDD Document
This Guaranty will terminate upon the termination or expiration of the Agreement, except that all obligations and liabilities of the undersigned which arose from events which occurred on or before the effective date of such termination will remain in full force and effect until satisfied or discharged by the undersigned, and all covenants which by their terms continue in force after the expiration or termination of the Agreement will remain in force according to their terms. Upon the death of an individual guarantor, the estate of such guarantor will be bound by this Guaranty, but only for defaults and obligations hereunder existing at the time of death; and the obligations of the other guarantors will continue in full force and effect.
Unless specifically stated otherwise, the terms used in this Guaranty will have the same meaning as in the Agreement, and will be interpreted and construed in accordance with Section 21 of the Agreement. This Guaranty will be interpreted and construed under the laws of the State of California. In the event of any conflict of law, the laws of California will prevail, without regard to, and without giving effect to, the application of the State of California conflict of law rules.
Source: Item 22 — CONTRACTS (FDD page 101)
What This Means (2025 FDD)
The 2025 Marble Slab Creamery Franchise Disclosure Document states that the Guaranty remains in effect even upon termination or expiration of the Franchise Agreement. Specifically, the obligations and liabilities of the guarantor arising from events before the termination date remain in full force until satisfied.
This means that if a Marble Slab Creamery franchisee defaults on their obligations before the agreement ends, and the guarantor is responsible for those debts, the guarantor's obligations continue even if the franchise agreement terminates. This includes scenarios where the franchisee declares bankruptcy. The guarantor's responsibility extends to covering any outstanding debts or liabilities that the franchisee incurred during the franchise term.
Furthermore, the Guaranty specifies that any current or future indebtedness by the franchisee to the guarantor is subordinate to any debt owed to Marble Slab Creamery. This subordination ensures that Marble Slab Creamery's financial interests are prioritized over any claims the guarantor might have against the franchisee. The guarantor must also modify any financing statements to reflect this priority.
Upon the death of a guarantor, their estate remains bound by the Guaranty, but only for defaults and obligations existing at the time of death. The obligations of the other guarantors will continue in full force. This ensures that Marble Slab Creamery is protected even if one of the guarantors passes away.