What happens if an Aerus franchisee or guarantor commences bankruptcy proceedings?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
- (e) An involuntary petition or complaint shall be filed against Maker or any Guarantor seeking bankruptcy or reorganization of the Maker or such Guarantor or the appointment of a receiver, custodian, trustee, intervenor or liquidator of the Maker or such Guarantor, or of all or substantially all of the assets of the Maker or such Guarantor, and such petition or complaint shall not have been dismissed within forty-five (45) days after the filing thereof; or an order, order for relief, judgment or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of the Maker or such Guarantor or appointing a receiver, custodian, trustee, intervenor or liquidator of the Maker or such Guarantor, or of all or substantially all of the assets of the Maker or such Guarantor;
- (f) the failure of Maker or any Guarantor to have discharged within a period of ten (10) days after the commencement thereof any attachment, sequestration, execution or similar proceeding against any portion of the property covered by the Security Agreement;
- (g) Payee's liens, mortgages or security interests in any of the collateral for this Note should become unenforceable, or cease to be first priority liens, mortgages or security interests;
- (h) The occurrence of any "default" as defined in the Franchise Agreement; or
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the filing of an involuntary bankruptcy petition against a franchisee or any guarantor can trigger certain consequences related to financial obligations. Specifically, if an involuntary petition or complaint seeking bankruptcy or reorganization is filed against the franchisee or guarantor, or if a receiver is appointed for their assets, and such petition is not dismissed within 45 days, it can constitute an event of default. This default can occur if a court enters an order approving the petition for reorganization or appointing a receiver.
Additionally, a default can be triggered if the franchisee or guarantor fails to discharge any attachment, sequestration, execution, or similar proceeding against their property within 10 days of its commencement. Furthermore, if Aerus's liens, mortgages, or security interests in the collateral for any promissory note become unenforceable or cease to be first priority, it can also lead to a default. The occurrence of any "default" as defined in the Franchise Agreement itself also constitutes a default under these financial arrangements.
These provisions mean that prospective Aerus franchisees and their guarantors need to be aware that any significant financial distress leading to bankruptcy proceedings or similar actions could have serious repercussions on their franchise agreement and related financial obligations. It's important to maintain financial stability and address any financial difficulties promptly to avoid triggering these default clauses. Franchisees should seek legal counsel to fully understand the implications of these clauses and how they might be affected by financial challenges.