If a receiver is appointed for a Belocal franchisee's assets, does the franchise agreement automatically terminate?
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;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchise agreement can automatically terminate if a receiver is appointed to manage the franchisee's assets under certain conditions. Specifically, if a franchisee consents to the filing of a bill in equity or other proceeding for the appointment of a receiver, this triggers an automatic termination. Similarly, if a court of competent jurisdiction appoints a receiver or other custodian (permanent or temporary) for the franchisee's assets or property, this also results in automatic termination of the Belocal franchise agreement.
This provision means that a Belocal franchisee facing financial difficulties and potential receivership needs to be aware that their franchise agreement could be terminated without further notice if either they consent to the receivership proceedings or a court appoints a receiver. This could have significant implications for the franchisee's business and investment, as they would lose the right to operate under the Belocal brand and system.
It is important for prospective Belocal franchisees to understand these default and termination clauses, as financial distress can lead to the loss of their franchise. Franchisees should seek legal and financial advice to fully understand the implications of these clauses and to develop strategies for managing their business to avoid such situations. Understanding the conditions that trigger automatic termination allows franchisees to proactively address potential issues and protect their investment in the Belocal franchise.