What federal law might make the Aerus franchise agreement's termination upon bankruptcy provision unenforceable?

According to Aerus's 2025 Franchise Disclosure Document, a provision in the franchise agreement that allows Aerus to terminate the franchise if the franchisee declares bankruptcy may not be enforceable. Specifically, federal bankruptcy law, under 11 U.S.C. 101 et seq., could supersede the termination clause within the franchise agreement. This means that even if the Aerus franchise agreement states that bankruptcy is grounds for termination, a federal bankruptcy court might not uphold that provision. This is designed to protect franchisees who may be experiencing financial hardship and are seeking bankruptcy protection.

This addendum applies specifically to franchisees in Virginia. It is included to ensure compliance with both state and federal laws. Franchisees should be aware that federal law is designed to give individuals and businesses a fresh start, and contract provisions that automatically penalize someone for declaring bankruptcy are often viewed skeptically by the courts.

For a prospective Aerus franchisee, this information is crucial because it clarifies the protections available under federal law in the event of financial distress leading to bankruptcy. It suggests that the franchisee should consult with a legal professional to fully understand their rights and obligations under both the franchise agreement and federal bankruptcy law. This also highlights the importance of understanding the interplay between state-specific addenda and the overarching franchise agreement.