What is the timeframe for staying or dismissing bankruptcy proceedings to avoid termination of the Belocal 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;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if an involuntary petition is filed against a franchisee under bankruptcy laws, the franchisee has 60 days to have it dismissed to avoid automatic termination of the franchise agreement. This means that if a creditor or other party initiates bankruptcy proceedings against the Belocal franchisee, the franchisee must act swiftly to resolve the situation and have the petition dismissed within this timeframe.
This requirement is a critical aspect of the franchise agreement, as it stipulates an automatic termination clause upon the franchisee's insolvency or bankruptcy. The 60-day window provides a limited opportunity for the franchisee to address the bankruptcy petition and demonstrate financial stability. Failure to dismiss the petition within this period results in the immediate termination of the franchise agreement without further notice from Belocal.
It is important for prospective Belocal franchisees to understand the implications of this clause. Financial distress leading to an involuntary bankruptcy petition could jeopardize their investment and business operations. Franchisees should maintain sound financial management practices and seek professional advice if facing financial difficulties to avoid such situations. The franchisee also has the right to terminate the agreement if the other party becomes subject to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully stayed within seven business days or is not dismissed or vacated within 45 days after filing.
This type of clause is relatively standard in franchise agreements, as franchisors seek to protect their brand and system from the negative impacts of franchisee insolvency. However, the specific timeframes for addressing bankruptcy petitions can vary, so prospective franchisees should carefully review the termination provisions in the franchise agreement and understand their obligations in the event of financial distress.