If the manufacturer is involved in a bankruptcy-related event, can a 7 Brew franchisee terminate the Manufacturing Agreement?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| d. Termination by franchisee | 18.A of Franchise | If we breach Franchise Agreement and do not |
| Agreement | ||
| 4(a) of Manufacturing | ||
| Agreement | ||
| cure default within applicable cure period | ||
| after notice from you, or if your Store does | ||
| not reach a certain EBITDA level; otherwise, | ||
| you may not terminate without cause, subject | ||
| to state law. | ||
| Subject to state law, you may terminate | ||
| Manufacturing Agreement if the | ||
| manufacturer fails to perform obligations and | ||
| to cure the failure within 30 days after notice, | ||
| or if the manufacturer becomes insolvent or is | ||
| involved in a bankruptcy-related event. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 54–61)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, a franchisee has the ability to terminate the Manufacturing Agreement if the manufacturer becomes insolvent or is involved in a bankruptcy-related event. However, this right is subject to state law.
Specifically, the FDD states that the franchisee can terminate the Manufacturing Agreement if the manufacturer fails to perform its obligations and does not cure the failure within 30 days after notice. Alternatively, the franchisee can terminate the agreement if the manufacturer becomes insolvent or is involved in a bankruptcy-related event.
This provision protects 7 Brew franchisees in the event that the manufacturer, a critical part of the supply chain, faces severe financial distress. It allows the franchisee to seek alternative suppliers and maintain business operations without being tied to a failing manufacturer. It is important for prospective franchisees to understand the conditions under which they can terminate the Manufacturing Agreement, as this can have a significant impact on their business.