Under what circumstances will an Aplus franchise agreement automatically terminate without notice due to bankruptcy or insolvency?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
9.1. Termination In the Event of Bankruptcy or Insolvency. You shall be deemed to be in default under this Agreement, and all rights granted to you in this Agreement shall automatically terminate without notice, if you become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by you or such a petition is filed against you and you do not oppose it; if you are adjudicated as bankrupt or insolvent; if a bill in equity or other proceeding for the appointment of a receiver for you or other custodian for your business or assets is filed and consented to by you; if a receiver or other custodian (permanent or temporary) of your assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; if proceedings for a composition with creditors under any state or federal law is instituted by or against you; if a final judgment remains unsatisfied or of record for 30 days or longer (unless a supersedeas bond is filed); if you are dissolved; if execution is levied against your business or property; if judicial, non-judicial or administrative proceedings to foreclose any lien or mortgage against any Franchised Location premises or assets or equipment is instituted against you and not dismissed within 30 days; or if the real or personal property of the Store is sold after levy thereupon by any sheriff, marshal, or constable.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, the franchise agreement will automatically terminate without notice if the franchisee is in default due to bankruptcy or insolvency. This encompasses a range of financial distress scenarios.
Specifically, the agreement terminates automatically if the franchisee becomes insolvent, makes an assignment for the benefit of creditors, files a bankruptcy petition (or does not oppose one filed against them), or is adjudicated bankrupt or insolvent. It also includes situations where a receiver is appointed for the franchisee's business or assets with their consent, or if proceedings for composition with creditors are instituted.
Further conditions leading to automatic termination include an unsatisfied final judgment of record for 30 days or longer (unless a supersedeas bond is filed), dissolution of the franchisee, execution levied against the business or property, or institution of foreclosure proceedings against the franchised location that are not dismissed within 30 days. Finally, the agreement terminates automatically if the store's real or personal property is sold after levy by a sheriff, marshal, or constable.
This section of the Aplus franchise agreement is typical within the franchise industry, as franchisors seek to protect their brand and system from the instability and potential damage associated with a franchisee's severe financial difficulties. Franchisees should be aware of these conditions and maintain financial stability to avoid automatic termination of their franchise agreement.