What legal actions against a Belocal franchisee can lead to automatic termination of the franchise agreement?
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;
- (9) a final judgment remains unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed);
- (10) Franchisee is dissolved;
- (11) This Agreement and the Franchised Business are not transferred in accordance with Section 9 of this Agreement within six months of the death or disability of Franchisee or any of its Principals, unless Franchisor grants an extension in writing; or
- (12) execution is levied against Franchisee's business or property.
- C. Termination on Notice; No Cure.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, there are several legal and financial actions that can lead to the automatic termination of the franchise agreement without notice. These include situations related to insolvency, bankruptcy, and judgments against the franchisee.
Specifically, the franchise agreement will automatically terminate if the franchisee becomes insolvent or makes a general assignment for the benefit of creditors. Filing a voluntary petition under federal bankruptcy law, or having an involuntary petition filed against them that is not dismissed within 60 days, also triggers automatic termination. Additionally, admitting in writing the inability to pay debts when due, being adjudicated bankrupt or insolvent, or consenting to the appointment of a receiver for the business or assets will result in automatic termination.
Further, if proceedings for a composition with creditors are instituted by or against the franchisee, or if a final judgment remains unsatisfied or of record for 30 days or longer (unless a supersedeas bond is filed), the franchise agreement is automatically terminated. The dissolution of the franchise, failure to transfer the agreement and franchised business within six months of the death or disability of the franchisee or its principals (unless an extension is granted), or execution levied against the franchisee's business or property also lead to automatic termination. These terms highlight the critical importance of maintaining financial stability and adhering to legal obligations for Belocal franchisees.