Does the Red Wagon Club Guaranty specify a limit to the amount the Guarantor is liable for?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
In consideration of, and as an inducement to, the execution of that certain Franchise Agreement (as amended, modified, restated or supplemented from time to time, the "Agreement") on this date by RED WAGON CLUB FRANCHISE, LLC ("Franchisor"), each Guarantor personally and unconditionally (a) guarantees to Franchisor and its successors and assigns, for the term of the Agreement and afterward as provided in the Agreement, that __________________________________________________ ("Franchise Owner") will punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Agreement and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the non-competition, confidentiality, and transfer requirements.
Each Guarantor consents and agrees that: (1) Guarantor's direct and immediate liability under this Guaranty will be joint and several, both with Franchise Owner and among other guarantors; (2) Guarantor will render any payment or performance required under the Agreement upon demand if Franchise Owner fails or refuses punctually to do so; (3) this liability will not be contingent or conditioned upon Franchisor's pursuit of any remedies against Franchise Owner or any other person; (4) this liability will not be diminished, relieved, or otherwise affected by any extension of time, credit, or other indulgence which Franchisor may from time to time grant to Franchise Owner or to any other person, including, without limitation, the acceptance of any partial payment or performance or the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable during the term of the Agreement; and (5) at Franchisor's request, each Guarantor shall present updated financial information to Franchisor as reasonably necessary to demonstrate such Guarantor's ability to satisfy the financial obligations of Franchise Owner under the Agreement.
Each Guarantor waives: (i) all rights to payments and claims for reimbursement or subrogation which any Guarantor may have against Franchise Owner arising as a result of the Guarantor's execution of and performance under this Guaranty; and (ii) acceptance and notice of acceptance by Franchisor of Guarantor's undertakings under this Guaranty, notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed, protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed, and any other notices to which he or she may be entitled.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, the Guaranty and Assumption of Obligations agreement does not specify a limit to the amount the Guarantor is liable for. Instead, each Guarantor personally and unconditionally guarantees that the Franchise Owner will punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Franchise Agreement for the term of the agreement and afterward as provided in the agreement. The Guarantor also agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the non-competition, confidentiality, and transfer requirements.
This means that the Guarantor's liability extends to all obligations of the Franchise Owner under the Franchise Agreement, without any stated cap or limit. This includes not only monetary obligations like franchise fees and royalties but also non-monetary obligations such as adhering to system standards, maintaining confidentiality, and complying with non-compete clauses. The Guarantor's liability is joint and several with the Franchise Owner and among other guarantors, meaning Red Wagon Club can pursue any guarantor for the full amount of the obligation, regardless of whether other guarantors exist or whether the Franchise Owner is also being pursued.
Furthermore, the Guaranty states that this liability will not be contingent or conditioned upon Red Wagon Club's pursuit of any remedies against Franchise Owner or any other person and will not be diminished, relieved, or otherwise affected by any extension of time, credit, or other indulgence which Franchisor may from time to time grant to Franchise Owner or to any other person. The Guarantor also waives all rights to payments and claims for reimbursement or subrogation which any Guarantor may have against Franchise Owner arising as a result of the Guarantor's execution of and performance under this Guaranty. This comprehensive and unlimited guarantee places a significant financial and legal burden on the Guarantor, who should carefully consider the implications before signing the agreement.