Can Stretch Zone transfer or assign the Guaranteed Obligations without notice to the Guarantor?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchisor may at any time, without notice to the Guarantor, transfer or assign to any person or entity any of the Guaranteed Obligations, or any interest in the Guaranteed Obligations.
In this event, the assignee or transferee of the Guaranteed Obligations, or any interest in the Guaranteed Obligations is, to the extent of its interest, is entitled to the benefits of this Guaranty to the same extent as if the assignee or transferee were the Franchisor.
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 Stretch Zone's 2025 Franchise Disclosure Document, Stretch Zone can transfer or assign the Guaranteed Obligations to another entity without notifying the guarantor. The document states that Stretch Zone has the right to transfer or assign any of the Guaranteed Obligations, or any interest in them, to any person or entity at any time without providing notice to the Guarantor.
This means that if a franchisee has a guarantor for their financial obligations to Stretch Zone, Stretch Zone can transfer the right to receive those payments to a third party. The guarantor would then be obligated to pay that third party instead of Stretch Zone if the franchisee defaults.
This clause protects Stretch Zone by allowing them to freely manage and potentially monetize their financial interests in the franchise agreements. However, it places a risk on the guarantor, who may find themselves dealing with a different entity without prior knowledge. The assignee or transferee of the Guaranteed Obligations is entitled to the benefits of the Guaranty to the same extent as Stretch Zone.