Under what circumstances related to bankruptcy might the termination provisions in the Bb.Q Chicken Franchise Agreement and Multi-Unit Operator Agreement be unenforceable?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 4 - Bankruptcy:
No bankruptcy information is required to be disclosed in this Item
Exhibit J to the BBDOTQ USA, Inc. Franchise Disclosure Document
FRANCHISEE ACKNOWLEDGEMENT STATEMENT
NOT FOR USE IN CALIFORNIA, MARYLAND, AND WASHINGTON
'Do not sign if the franchisee is a Maryland resident or if the franchised business will be located within the State of Maryland.
Acknowledgement of the truthfulness of the statements below are an inducement for the Franchisor to enter into a Franchise Agreement (or Multi-Unit Development Agreement). Notify Franchisor immediately, prior to acknowledgment, if any statement below is incomplete or incorrect.
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee (or developer) in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
Based on the 2025 Bb.Q Chicken Franchise Disclosure Document, Item 4 states that no bankruptcy information is required to be disclosed. However, the addendum to the franchise agreement for use in the Commonwealth of Virginia states that if any grounds for default or termination stated in the franchise agreement and development agreement does not constitute "reasonable cause," as that term may be defined in the Virginia Retail Franchising Act or the laws of Virginia, the provision may not be enforceable. This suggests that certain termination provisions, including those related to bankruptcy, could be deemed unenforceable if they lack reasonable cause under Virginia law. This protection is specific to Virginia.
This means that if Bb.Q Chicken attempts to terminate a franchise agreement in Virginia based on a bankruptcy-related clause that is not considered "reasonable cause" under Virginia law, a franchisee could potentially challenge the termination in court. The franchisee could argue that the specific termination clause is unenforceable, potentially preventing the termination of their franchise. This could have significant implications for both the franchisor and franchisee in the event of a bankruptcy filing.
For prospective Bb.Q Chicken franchisees in Virginia, this addendum provides an additional layer of protection against potentially unfair termination practices. It is important for franchisees to understand their rights under the Virginia Retail Franchising Act and to seek legal counsel if they believe a termination clause is being unfairly applied. Franchisees should consult with legal counsel to understand what constitutes "reasonable cause" in the context of franchise terminations related to bankruptcy under Virginia law. This ensures they are fully aware of their rights and can take appropriate action if necessary.