In the context of a Bambu franchise, what actions are considered 'assignments for the benefit of creditors' that could lead to termination?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee becomes insolvent or is adjudicated a bankrupt; or if any action is taken by Franchisee, or by others against Franchisee under any insolvency, bankruptcy or reorganization act, (this provision may not be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq.); or if Franchisee makes an assignment for the benefit of creditors or a receiver is appointed by Franchisee.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, if a franchisee makes an assignment for the benefit of creditors, Bambu has the right to terminate the Franchise Agreement, effective immediately upon notice. This means that if the franchisee transfers assets to a third party to manage and distribute to the franchisee's creditors, Bambu can terminate the agreement without providing an opportunity to cure the default. This is a significant risk for franchisees facing financial difficulties.
Additionally, the FDD states that termination can occur if the franchisee becomes insolvent or is adjudicated bankrupt, or if any action is taken by the franchisee or others against the franchisee under any insolvency, bankruptcy, or reorganization act.
These termination rights are at Bambu's option, meaning they are not obligated to terminate the agreement, but have the right to do so. This clause is fairly standard in franchise agreements, as franchisors want to protect their brand and system standards from franchisees who are facing significant financial distress.