What happens if an Aw franchisee files for bankruptcy?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
time to time, whether or not such failures to comply are corrected after notice of those failures to comply is delivered to you; and
(j) fail on two (2) or more occasions during any calendar year to attend and complete any mandatory supplemental education or conference required by Paragraph 5.3 or Paragraph 5.4 of this Agreement.
This Agreement will expire automatically without notice upon the presentation for filing by you (or any of your Owners) of a petition or application seeking any type of relief under the Federal Bankruptcy Act or any state insolvency or similar law. (Upon presentation for filing of such a petition or application, the term of this Agreement will be deemed to be amended so that the expiration of this Agreement occurs at the moment said petition or application is presented to a court official for stamping and filing.) 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 Aw's 2025 Franchise Disclosure Document, the franchise agreement will automatically expire if the franchisee files for bankruptcy. Specifically, the agreement expires without notice the moment a franchisee (or any of their owners) presents a petition seeking relief under the Federal Bankruptcy Act or any similar state law. The FDD clarifies that the agreement's term is amended to expire the instant such a petition is officially filed with the court.
Similarly, the franchise agreement will automatically terminate if a third party files a bankruptcy petition against the franchisee (or any of their owners), seeking to have them declared bankrupt or insolvent. However, in this case, the termination is not immediate. Instead, the termination occurs automatically 60 days after the petition is filed, unless the petition is dismissed within that 60-day period. The FDD states that the agreement's term is amended to expire on that 60th day.
The FDD emphasizes that the franchisee and their owners expressly waive any rights they might have under federal bankruptcy rules. They consent to the termination or expiration of the agreement and any other relief Aw might seek to lift any automatic stay provisions under bankruptcy rules. Furthermore, the franchisee and their owners agree not to seek any court injunction that would prevent this provision from taking effect. This clause strongly favors Aw in the event of a franchisee bankruptcy, allowing Aw to terminate the agreement and potentially recover amounts paid to the franchisee as a preference, fraudulent transfer, or otherwise in a bankruptcy proceeding.