If a Bambu franchisee is adjudicated bankrupt, is there any exception to the termination clause based on federal bankruptcy law?
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, the franchise agreement contains a clause addressing the franchisee's insolvency or bankruptcy. Specifically, if a franchisee is adjudicated bankrupt, Bambu has the right to terminate the agreement. However, the FDD also states that this particular provision regarding insolvency or bankruptcy may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C. §§ 101 et seq.
This means that while the Bambu franchise agreement stipulates termination upon a franchisee's bankruptcy, federal law might override this clause, potentially protecting the franchisee's rights under bankruptcy proceedings. This acknowledgment suggests that the enforceability of the termination clause is subject to the protections and regulations outlined in federal bankruptcy statutes.
For a prospective Bambu franchisee, this information is crucial. It indicates that the standard franchise agreement's termination clause related to bankruptcy may not be absolute and could be challenged or deemed unenforceable based on federal law. A franchisee facing financial difficulties and potential bankruptcy should seek legal counsel to understand their rights and the potential impact of federal bankruptcy laws on their franchise agreement with Bambu.