What happens to the Belocal agreement if the franchisee becomes subject to bankruptcy or insolvency proceedings?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- B. Automatic Termination. Franchisee shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Franchisee if:
- (1) Franchisee becomes insolvent or makes a general assignment for the benefit of creditors;
- (2) Franchisee files a voluntary petition under any section or chapter of federal bankruptcy law or under any similar law or statute of the United States or any state thereof;
- (3) an involuntary petition is filed with respect to Franchisee under any such laws and is not dismissed within 60 days after it is filed;
- (4) Franchisee admits in writing its inability to pay its debts when due;
- (5) Franchisee is adjudicated as bankrupt or insolvent in proceedings filed against Franchisee under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state;
- (6) a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee;
- (7) a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction;
- (8) proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchise agreement can be automatically terminated if the franchisee becomes insolvent or is involved in bankruptcy proceedings. Specifically, the agreement will automatically terminate without notice if the franchisee becomes insolvent, makes an assignment for the benefit of creditors, or files a voluntary bankruptcy petition.
Additionally, automatic termination occurs if an involuntary bankruptcy petition is filed against the franchisee and not dismissed within 60 days, or if the franchisee admits in writing their inability to pay debts. Termination also occurs if the franchisee is adjudicated bankrupt or insolvent, consents to the appointment of a receiver, or if a receiver is appointed for the franchisee's assets.
Furthermore, the agreement terminates automatically if proceedings for a composition with creditors are instituted by or against the franchisee. This means that Belocal franchisees need to be aware that any form of insolvency or bankruptcy can lead to an immediate loss of their franchise.