If a Beehive Homes franchisee is adjudicated bankrupt, does this constitute an event of default?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.1. Events of Default. The following, subject to the notice requirements of Section 14.2 below, shall constitute "Events of Default":
- (d) There shall be filed by or against Franchisee, in any court pursuant to any statute, either of the United States or any state, a petition for any relief under the Federal Bankruptcy Act or for reorganization or for the appointment of a receiver or trustee for the
property of Franchisee, which is not vacated within a period of twenty (20) days, or Franchisee shall be adjudicated bankrupt or insolvent within the meaning of insolvency in either Bankruptcy Act proceedings or equity proceedings, or shall make a general assignment for the benefit of creditors, or, admit in writing its inability to pay its debts as they mature, or, as debtor, take the benefit of the provisions of any debtor relief act, whether now or hereafter enacted;
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, a franchisee being adjudicated bankrupt constitutes an event of default. Specifically, if a franchisee is adjudicated bankrupt or insolvent, it is considered an event of default under the franchise agreement.
The FDD specifies that if a petition for relief under the Federal Bankruptcy Act is filed by or against the franchisee and is not vacated within 20 days, or if the franchisee is adjudicated bankrupt or insolvent, makes a general assignment for the benefit of creditors, admits in writing inability to pay debts, or takes the benefit of any debtor relief act, it triggers an event of default. This clause protects Beehive Homes by allowing them to take action if a franchisee's financial instability threatens the brand or their ability to meet obligations.
Upon such an event of default, Beehive Homes is required to provide the franchisee with a written Notice of Default. The franchisee then has a period to cure the default, the length of which depends on the nature of the default and the laws of the state where the Beehive Homes location is situated. If the default is not cured within the specified time, Beehive Homes has the right to terminate the franchise agreement.
Upon termination due to bankruptcy, the franchisee must cease operating as a Beehive Homes franchisee, discontinue using Beehive Homes' names and marks, and fulfill certain financial obligations, including paying outstanding fees and a cancellation fee of $10,000. Additionally, Beehive Homes has the right to purchase the Home and its contents, or the franchisee may be obligated to sell the Home within four months after receiving written notice from Beehive Homes.