Under what circumstances might the Aerus franchise agreement's termination provision related to bankruptcy be unenforceable in California?

According to Aerus's 2025 Franchise Disclosure Document, the franchise agreement includes a provision that allows Aerus to terminate the agreement if the franchisee declares bankruptcy. However, this termination provision may not be enforceable in California due to Federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.). This means that if a franchisee in California files for bankruptcy, a court might not uphold Aerus's right to terminate the franchise agreement solely based on the bankruptcy filing.

This addendum serves as a warning to potential franchisees in California, advising them that certain clauses in the franchise agreement may not be valid under California law, offering some protection to franchisees. It is not uncommon for franchise agreements to include clauses that are state-specific, and this addendum ensures that franchisees are aware of their rights under California law.

Prospective Aerus franchisees in California should seek legal counsel to fully understand their rights and obligations under both the franchise agreement and California law. This is particularly important regarding termination, non-compete clauses, arbitration, and choice of law, as these provisions may be subject to different interpretations or limitations in California.