If a Bee Organized franchisee files for bankruptcy, is the franchise agreement terminated?
Bee_Organized Franchise · 2025 FDDAnswer from 2025 FDD Document
- (c) Franchisee files a voluntary petition in bankruptcy, Franchisee is adjudicated bankrupt or insolvent, and/or Franchisee files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any applicable federal and/or state law relative to bankruptcy, insolvency or similar relief for debtors;
- D. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101, et seq.).
Source: Item 23 — RECEIPTS (FDD pages 54–218)
What This Means (2025 FDD)
According to Bee Organized's 2025 Franchise Disclosure Document, the franchise agreement can be automatically terminated if a franchisee files for bankruptcy. Specifically, if a franchisee files a voluntary petition in bankruptcy or any similar action seeking relief under federal or state law relating to bankruptcy, Bee Organized has the option to immediately terminate the agreement without notice or opportunity to cure the default. This is a significant risk for franchisees, as financial instability can lead to an automatic termination of the franchise.
However, the FDD also includes a Maryland FDD Amendment that states the franchise agreement provides for termination upon bankruptcy, but this provision may not be enforceable under federal bankruptcy law. This means that while Bee Organized's standard agreement allows for termination in the event of bankruptcy, federal law might override this provision, potentially protecting the franchisee.
Prospective franchisees should be aware of these clauses and how they might be affected by both state and federal laws. It is important to consult with a legal professional to fully understand the implications of these termination clauses and how they interact with bankruptcy laws in their specific state.