What is the potential issue with the Atwell Suites License Agreement's provision for termination upon bankruptcy, according to the FDD?

According to the 2025 FDD, the Atwell Suites License Agreement contains provisions that allow for termination of the license if the franchisee declares bankruptcy. However, several state-specific amendments clarify that the enforceability of these provisions is subject to federal bankruptcy law and the rulings of a court of competent jurisdiction. This means that while the agreement may state that bankruptcy is grounds for termination, federal law ultimately determines whether Atwell Suites can actually terminate the agreement under those circumstances. These amendments appear in the state supplements for California, Hawaii, Illinois, Maryland, North Dakota, Rhode Island, and Virginia.

This acknowledgment is important for prospective Atwell Suites franchisees because it highlights the potential uncertainty surrounding the termination clause. Bankruptcy laws are complex and can vary, so the franchisor's ability to enforce the termination clause may be limited. This does not mean the clause is automatically unenforceable, but rather that a court will need to review the specific circumstances and applicable laws to make a determination.

For a potential Atwell Suites franchisee, this means understanding that the franchise agreement's terms are not always the final word. Federal bankruptcy law takes precedence, and the franchisee's rights in a bankruptcy situation will be determined by the courts. It would be prudent for a prospective franchisee to consult with a legal professional experienced in franchise and bankruptcy law to fully understand their rights and obligations should they face financial difficulties during the term of the license agreement.