What happens if proceedings for composition with creditors are instituted by or against a Belocal franchisee?
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 proceedings for composition with creditors under any state or federal law are instituted by or against a Belocal franchisee, the franchisee will be considered in default of their franchise agreement. Consequently, all rights granted to the franchisee under the agreement will automatically terminate without any prior notice.
This clause is a fairly standard protective measure for franchisors. It allows Belocal to immediately sever ties with a franchisee facing significant financial distress. This protects the Belocal brand and system from potential damage associated with a struggling or insolvent franchisee.
For a prospective Belocal franchisee, this underscores the importance of maintaining financial stability. It means that even if a franchisee is trying to negotiate with creditors to avoid bankruptcy through a composition, Belocal can terminate the agreement. Franchisees should carefully consider the financial risks and ensure they have sufficient capital and a solid business plan to avoid such financial difficulties.