What is the effect of the Bankruptcy Code on the Monicals Pizza Guarantor's obligations?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
The obligations of Guarantor herein shall be co-extensive with those of Franchisee under the Franchise Agreement and each Related Agreement and shall remain in effect as long as Franchisee's obligations under the Franchise Agreement and each Related Agreement are in effect. This Guaranty Agreement is absolute and unconditional and shall continue without being affected by any impairment, release or limitation of the liability of Franchisee or its estate in bankruptcy resulting from the operation of any present or future provision of the Bankruptcy Code of the United States or from the decision of any court interpreting the same. Guarantor further agrees to be bound by each and every obligation of Franchisee under the Franchise Agreement and each Related Agreement, with
the same force and effect as if Guarantor were designated in and had executed the Franchise Agreement and each Related Agreement as Franchisee thereunder.
This Guaranty Agreement is a primary guaranty of payment and performance and shall not be subject to any counterclaim, set-off, deduction or defense. No failure or delay on the part of Franchisor or any Affiliate in exercising any right or remedy under the Franchise Agreement, any Related Agreement and/or this Guaranty Agreement shall operate as a waiver thereof nor shall a single or partial exercise of any right or remedy preclude any other or further exercise thereof, and all rights and remedies of Franchisor and each Affiliate hereunder and under the Franchise Agreement and each Related Agreement shall be cumulative. Until all Franchisee's obligations under the Franchisee Agreement and each Related Agreement are fully performed, Guarantor waives any rights that it may have against Franchise or any Affiliate by reason of Guarantor's compliance with the Guaranty Agreement, and subordinates any liability or indebtedness of Franchisee held by Guarantor to the obligations of Franchisee to Franchisor and each Affiliate under the Franchise Agreement and each Related Agreement.
If Guarantor consists of more than one person and/or entity, (a) this Guaranty Agreement shall be binding on all of them jointly and severally, and (b) notice to or from any of them will constitute notice to or from each of them.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the Guaranty Agreement is structured to remain effective regardless of bankruptcy proceedings involving the franchisee or developer. The obligations of the guarantor are co-extensive with those of the franchisee or developer under the Franchise Agreement or Development Agreement, respectively, and any related agreements. This means the guarantor's responsibilities continue as long as the franchisee's or developer's obligations are in effect.
The agreement is designed to be absolute and unconditional, meaning it is not affected by any impairment, release, or limitation of liability of the franchisee or developer, even if bankruptcy occurs. This protection extends to any present or future provisions of the Bankruptcy Code of the United States or any court decisions interpreting it. The guarantor is bound by every obligation of the franchisee or developer as if the guarantor had originally signed the Franchise Agreement or Development Agreement and related documents as the franchisee or developer.
This arrangement provides Monicals Pizza with a safeguard, ensuring that the obligations under the agreements are met even if the franchisee or developer faces financial difficulties leading to bankruptcy. The guarantor cannot use the franchisee's or developer's bankruptcy as a reason to avoid their obligations. This clause is a primary guaranty of payment and performance, meaning it is not subject to any counterclaim, set-off, deduction, or defense. The guarantor also waives any rights they may have against the franchisee or developer due to their compliance with the Guaranty Agreement until all obligations are fully performed, and subordinates any liability or indebtedness of the franchisee or developer held by the guarantor to the obligations owed to Monicals Pizza.
For a prospective Monicals Pizza franchisee, this means that if they are required to have a guarantor for their obligations, that guarantor's responsibilities will not be diminished or discharged due to bankruptcy. The guarantor should be fully aware of the scope and unconditional nature of this agreement, as it remains in effect regardless of the franchisee's financial status or any changes resulting from bankruptcy proceedings. If the Guarantor consists of multiple people or entities, the agreement is binding on all of them jointly and severally, and notice to or from any of them will constitute notice to or from each of them.