Under the Stretch Zone Guaranty, what defense can the Guarantor use against payment?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
All payments are made without set-off, deduction or withholding for any reason, and are final and free from any defense, claim or counterclaim of the Guarantor except the defense that the Franchisee has paid in full all Guaranteed Obligations.
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, a Guarantor providing a guaranty for a Stretch Zone franchisee's obligations has very limited defenses against payment. Specifically, the Guarantor can only claim that the franchisee has already paid the full amount of the Guaranteed Obligations.
This means that the Guarantor cannot use other potential defenses, claims, or counterclaims to avoid payment. The Guarantor's obligation to pay is absolute, except for the single defense that the underlying debt has been fully satisfied by the franchisee. This is a significant point for anyone considering acting as a Guarantor, as they are essentially committing to cover the franchisee's debts with very little recourse.
This clause is designed to protect Stretch Zone by ensuring prompt payment of obligations. By limiting the defenses available to the Guarantor, Stretch Zone reduces the risk of delays or disputes in collecting amounts owed. Prospective Guarantors should carefully consider the financial stability and payment history of the franchisee they are guaranteeing, as their own assets are at risk if the franchisee defaults and the only recourse is if the franchisee has already paid the full amount.