Is the Guarantor's liability under the Stretch Zone Guaranty joint, several, or both?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Guaranty. If you are a Business Entity, each Franchise Owner holding a direct or indirect interest of 20% or more in you will execute an agreement, in the form that we designate, undertaking to be personally bound, jointly and severally with such other guaranteeing Franchise Owners, by all provisions of this Agreement and any and all related agreements (a "Guaranty"), the current version of which is attached as Exhibit G to the FDD. In addition, at our request, the spouse of each such guaranteeing Franchise Owner (as applicable) will execute the Guaranty.
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- Enforcement. In any proceeding under this Guaranty, the Franchisor may act against the Guarantor separately, or against 2 or more Guarantors jointly, or against some separately and some jointly.
In any action or proceeding to enforce this Guaranty against the Guarantor, the Franchisor is not required to join the Developer, or any other Guarantor, unless it elects to do so in its sole discretion.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone FDD, if a franchisee is a business entity, each franchise owner holding a direct or indirect interest of 20% or more must execute a guaranty. This agreement binds them personally, jointly, and severally with other guaranteeing franchise owners to all provisions of the franchise agreement and related agreements. Spouses of these guaranteeing franchise owners may also be required to execute the Guaranty at Stretch Zone's request.
This means that Stretch Zone can pursue any one or more of the guarantors for the full amount of the obligations, regardless of the involvement or responsibility of the other guarantors. If one guarantor pays the full amount, they may then need to seek contribution from the other guarantors to equalize the burden. This is a significant responsibility, as the guarantor's personal assets are at risk if the franchisee fails to meet its obligations.
The FDD also states that in any proceeding under the Guaranty, Stretch Zone may act against the Guarantor separately, or against 2 or more Guarantors jointly, or against some separately and some jointly. In any action to enforce the Guaranty, Stretch Zone is not required to include the franchisee or any other guarantor unless it chooses to do so. This clause reinforces the 'several' aspect of the liability, giving Stretch Zone considerable flexibility in pursuing guarantors.
This type of guarantee is common in franchising, as it provides the franchisor with added security that the franchisee's obligations will be met. Prospective Stretch Zone franchisees should carefully consider the implications of this personal guarantee and seek legal advice to fully understand their obligations and potential liabilities.