Can All Team terminate the franchise agreement immediately if the franchisee declares bankruptcy?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding anything contained herein to the contrary, if state law permits, ATFC shall be permitted to terminate the franchise immediately and without notice when the basis or grounds for cancellation is: (a) conviction of a felony or any other criminal misconduct which, in ATFC's opinion materially and adversely affects the operation, maintenance, reputation, or goodwill of the franchise; (b) fraudulent activity which, in ATFC's opinion, materially and adversely affects the operation, maintenance, reputation, or goodwill of the franchise; (c) abandonment of the franchise; (d) bankruptcy or insolvency of the FRANCHISEE; (e) the termination of any other agreement between FRANCHISEE and ATFC or its affiliates; (f) repeated failure or refusal to comply with the lawful provisions of this Agreement, (i.e., three (3) or more times in any twelve (12) month period) whether or not such failures or refusals are corrected after notice; or (g) any other act or omission which permits termination without notice and/or an opportunity to cure under applicable state law.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, All Team can terminate the franchise agreement immediately if the franchisee declares bankruptcy, but this is contingent on state law. Specifically, if state law permits, All Team can terminate the franchise agreement immediately and without notice if the franchisee declares bankruptcy or becomes insolvent.
This means that if the franchisee's business faces severe financial distress leading to bankruptcy, All Team has the right to immediately terminate the franchise agreement. The franchisee would not be given an opportunity to remedy the situation. This is a significant risk for franchisees, as bankruptcy can arise from various unforeseen circumstances.
It is important to note that this immediate termination is subject to state law. Some states may have regulations that require a notice period or an opportunity to cure, even in cases of bankruptcy. Therefore, prospective franchisees should consult with legal counsel to understand the specific laws in their state regarding franchise terminations due to bankruptcy or insolvency. This will help them assess the potential risks and protect their investment.