What happens if a Belocal franchisee admits in writing their inability to pay debts when due?
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;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a franchisee admits in writing their inability to pay debts when due, it constitutes an automatic default under the Franchise Agreement. This means that all rights granted to the franchisee under the agreement automatically terminate without any prior notice from Belocal.
This provision is a significant risk for potential Belocal franchisees. An admission of inability to pay debts, even if temporary, triggers immediate termination. The franchisee loses all rights to operate under the Belocal brand and must immediately cease operations. This can lead to substantial financial losses, especially if the franchisee has invested heavily in the business.
In addition to the automatic termination, the franchisee may also be liable for additional costs and damages. The Franchise Agreement states that the franchisee is responsible for all liabilities, damages, costs, and expenses, including reasonable attorney's fees, incurred by Belocal in connection with any default by the franchisee. Therefore, a franchisee facing financial difficulties should seek professional advice and explore all possible options before admitting an inability to pay debts in writing, as this admission has severe consequences under the Belocal Franchise Agreement.