Under the Belocal franchise agreement, what specific bankruptcy laws trigger automatic termination if an involuntary petition is filed?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
.
- 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, the franchise agreement stipulates automatic termination if an involuntary petition is filed against the franchisee under any federal bankruptcy law or similar state or United States statute. However, this termination is only triggered if the petition is not dismissed within 60 days after the filing date.
This clause means that if creditors or other parties file a bankruptcy petition against a Belocal franchisee, the franchise can be terminated automatically by Belocal if the franchisee cannot get the petition dismissed within the specified timeframe. This creates a significant risk for franchisees facing financial difficulties, as they could lose their franchise rights in addition to dealing with the bankruptcy proceedings.
It is important to note that the FDD also states that such termination provisions related to bankruptcy may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.). Prospective Belocal franchisees should consult with a legal professional to fully understand their rights and obligations under both the franchise agreement and applicable bankruptcy laws.