If a Beard Papas franchisee becomes insolvent, what actions might be taken against them?

According to Beard Papas's 2025 Franchise Disclosure Document, several actions can be taken if a franchisee becomes insolvent. Specifically, if a franchisee is deemed insolvent, makes an assignment for the benefit of creditors, admits in writing their inability to pay debts, is adjudicated bankrupt, or files a voluntary bankruptcy petition (or has one filed against them), it constitutes a default that cannot be cured under the Franchise Agreement. This means Beard Papas has grounds to terminate the franchise agreement.

For a Multi-Unit Development Agreement, Beard Papas can terminate the agreement if the franchisee becomes insolvent, is adjudicated bankrupt, or if any action is taken by them or against them under any insolvency, bankruptcy, or reorganization act. This also applies if the franchisee makes an assignment for the benefit of creditors or a receiver is appointed.

These conditions are fairly standard in franchising, as insolvency directly impacts a franchisee's ability to meet their financial obligations and maintain brand standards. The inability to pay debts or manage the business effectively can harm the Beard Papas brand and system. Franchisees should be aware of these potential consequences and carefully manage their finances to avoid such situations.

It is important for prospective franchisees to understand these termination conditions and seek legal counsel to fully grasp the implications of insolvency under the Beard Papas Franchise Agreement and Multi-Unit Development Agreement.