Under the Red Wagon Club Guaranty, is a Guarantor's liability joint or individual?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2024 FDD)
According to Red Wagon Club's 2024 Franchise Disclosure Document, a Guarantor's liability under the Guaranty is joint and several. This means that each guarantor is both individually liable and jointly liable with the franchise owner and any other guarantors for the obligations under the Franchise Agreement.
In practical terms, Red Wagon Club can seek full payment or performance from any one guarantor, or any combination of guarantors, without first pursuing the franchise owner. This provides Red Wagon Club with a direct and immediate recourse to ensure all obligations are met. The guarantor cannot require Red Wagon Club to pursue other remedies or parties before seeking fulfillment of the obligations from them.
This arrangement benefits Red Wagon Club by providing a more secure guarantee, as they can choose to pursue the guarantor(s) with the most accessible assets. However, it places a significant risk on the guarantor, who could be held responsible for the entire debt or obligation, even if other parties are also responsible. A prospective franchisee should carefully consider the implications of this joint and several liability before agreeing to act as a guarantor.