Is the Potbelly Sandwich Works guarantee a continuing guarantee of payment or a guarantee of collection?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
Without limitation to the foregoing, Guarantor further agrees that its guarantee is a continuing guarantee of payment and performance of the Guaranteed
Obligations when due (whether or not any bankruptcy, insolvency or similar proceeding under applicable Law shall have stayed the accrual or collection of any of the Guaranteed Obligations or operated as a discharge thereof) and not of collection, and waives any right to require that resort be had by Seller to the Purchaser for the collection and performance of the Guaranteed Obligations. If at any time any payment of any Guaranteed Obligation by Purchaser is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of Purchaser or otherwise, Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time.
(d) Guarantor shall indemnify and reimburse Seller for any and all costs and expenses (including reasonable attorneys' fees) incurred by Seller in enforcing any rights under this Section 12.16.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, the guarantee is a continuing guarantee of payment. Specifically, the guarantor agrees to guarantee the payment and performance of the guaranteed obligations when due, regardless of any bankruptcy or insolvency proceedings. This means the guarantor's obligation to pay is immediate and ongoing.
This distinction is important because a guarantee of payment requires the guarantor to pay immediately if the purchaser defaults, whereas a guarantee of collection requires the seller to first attempt to collect from the purchaser before seeking payment from the guarantor. Potbelly Sandwich Works explicitly states that the guarantor waives any right to require that the seller first pursue the purchaser for collection.
Furthermore, the guarantor also agrees that if any payment by the purchaser is rescinded or returned due to insolvency or bankruptcy, the guarantor's obligations are reinstated as if the payment was never made. The guarantor also agrees to cover all costs and expenses, including reasonable attorney's fees, that Potbelly Sandwich Works incurs while enforcing its rights under this section.