Does the Aw franchise agreement terminate automatically if someone files for bankruptcy on behalf of the franchisee?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement will also terminate automatically without notice if someone files a petition or application seeking to have you (or any of your Owners) adjudicated a bankrupt or insolvent, or seeking other relief against you (or any of your Owners) under the Bankruptcy Act or any state insolvency or similar law and the petition or application is not dismissed within sixty (60) days after it is filed. In that event, the term of this Agreement will be deemed to be amended so that it expires on the 60th day after filing. You (and your Owners) expressly and knowingly waive any rights you may have under the provisions of the Federal Bankruptcy Rules, and consent to the termination or expiration of this Agreement, or any other relief which we may seek in a complaint to lift the provisions of any automatic stay under any bankruptcy rules. In addition, you (and your Owners) agree not to seek any injunctive relief from any court in any jurisdiction which would have the effect of staying or enjoining this provision.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to the 2025 Aw Franchise Disclosure Document, the franchise agreement will terminate automatically without notice if someone files a petition or application seeking to have the franchisee (or any of their Owners) adjudicated bankrupt or insolvent. This also applies if the filing seeks other relief against the franchisee (or any of their Owners) under the Bankruptcy Act or any state insolvency or similar law. However, there is a caveat: the termination is not immediate if such a petition or application is filed by someone else. Instead, the termination occurs automatically if the petition or application is not dismissed within sixty (60) days after it is filed. In that event, the term of the Agreement will be deemed to be amended so that it expires on the 60th day after filing.
Aw's franchise agreement also specifies that the franchisee (and their Owners) expressly and knowingly waive any rights they may have under the provisions of the Federal Bankruptcy Rules. They also consent to the termination or expiration of the Agreement, or any other relief which Aw may seek in a complaint to lift the provisions of any automatic stay under any bankruptcy rules. Furthermore, the franchisee (and their Owners) agree not to seek any injunctive relief from any court in any jurisdiction which would have the effect of staying or enjoining this provision.
This clause has significant implications for prospective Aw franchisees. It means that filing for bankruptcy, or having a bankruptcy petition filed against them, can lead to the immediate or near-immediate termination of their franchise agreement. The waiver of rights under bankruptcy rules further limits their ability to protect their franchise investment through bankruptcy proceedings. The inability to seek injunctive relief adds another layer of risk, potentially leaving franchisees with limited recourse in the event of a bankruptcy-related termination. Franchisees should seek legal counsel to fully understand the ramifications of these provisions before signing the franchise agreement.