What happens if a Beard Papas franchisee becomes insolvent or bankrupt regarding the Multi-Unit Development Agreement?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Sections in Multi-Unit Development Agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | 3 | Varies depending on the number of Shops to be developed and the Development Area. The agreement commences on the effective date and the term automatically expires at the earlier of the opening of the final Shop required for development, or the last day of the calendar month in which the final Shop was required to be open under the Multi-Unit Development Agreement. |
| b. | Renewal or extension of the | Not | There is no renewal of the Multi-Unit Development |
| term | applicable | Agreement. | |
| c. | Requirements for franchisee | Not | There is no renewal of the Multi-Unit Development |
| to renew or extend | applicable | Agreement. | |
| d. | Termination by franchisee | Not applicable | There is no option for your termination of the Multi-Unit Development Agreement. Subject to state law. |
| e. | Termination by franchisor | Not | We can terminate without cause only if you and we |
| without cause | applicable | mutually agree, in writing, to terminate. | |
| f. | Termination by franchisor with "cause" | 3.2 | We may terminate your Multi-Unit Development Agreement with cause. Your Multi-Unit Development Agreement can be terminated by us if: (a) you abandon your obligations under the Multi-Unit Development Agreement; (b) if you for four consecutive months, or any shorter period that indicates an intent by you to discontinue your development of Shops within the Development Area; (c) if you become insolvent or you are adjudicated bankrupt, or if any action is taken by you, or by others against you, under any insolvency, bankruptcy or reorganization act, or if you make an assignment for the benefit or creditors or a receiver is appointed by you; (d) if you fail to meet your development obligations under the Development Schedule for any single Development Period including, but not limited to, your failure to establish, open and/or maintain the cumulative number of Shops in accordance with Development Schedule; and/or (e) in the event that any one Franchise Agreement is terminated respecting any Shop and/or any other Franchise Agreement |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–51)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, if a franchisee becomes insolvent or is adjudicated bankrupt, Beard Papas has the right to terminate the Multi-Unit Development Agreement. This also applies if any action is taken by the franchisee, or by others against them, under any insolvency, bankruptcy, or reorganization act. Furthermore, if the franchisee makes an assignment for the benefit of creditors or a receiver is appointed, Beard Papas can terminate the agreement.
This provision protects Beard Papas from potential financial instability or mismanagement on the part of the franchisee that could jeopardize the development of multiple franchise locations. It allows Beard Papas to regain control over the development area and find a more financially stable partner to fulfill the development obligations.
For a prospective Beard Papas multi-unit franchisee, this highlights the critical importance of maintaining financial stability and adhering to all legal and financial obligations. Failure to do so could result in the termination of the development agreement and the loss of the opportunity to develop multiple Beard Papas locations. Franchisees should carefully consider their financial resources and business acumen before entering into a multi-unit development agreement with Beard Papas.