What constitutes an 'assignment for the benefit of creditors' that could lead to termination of a Bft franchise?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
15. DEFAULT AND TERMINATION OF AGREEMENT
15.1 Termination of Franchise by Franchisor. Franchisor shall have the right to terminate this Agreement for "good cause" upon delivering notice of termination to Franchisee. For purposes of this Agreement, "good cause" shall include, without limitation: (i) a material breach of this Agreement or any other agreement between Franchisee and Franchisor or any of Franchisor's affiliates, (ii) intentional, repeated or continuous breach of any provision of this Agreement or any other agreement between Franchisee and Franchisor or any of Franchisor's affiliates, and (iii) the breaches (and, if applicable, failure to cure such breaches) described below in this Section 15.
A. Immediate Termination. Franchisee shall be deemed to be in default and Franchisor may terminate this Agreement and all rights granted hereunder, without affording Franchisee any opportunity to cure the default, effective immediately upon receipt of notice by Franchisee, and such termination shall be for good cause where the grounds for termination are:
(1) Franchisee has made any material misrepresentation or omission in the Application Materials or otherwise in connection with applying for the franchise or in executing or performing under this Agreement or any other agreement between Franchisee and Franchisor or any of Franchisor's affiliates;
(2) Franchisee becomes insolvent by reason of Franchisee's inability to pay debts as they become due, or makes an assignment for the benefit of creditors or makes an admission of Franchisee's inability to pay obligations as they become due;
(3) Franchisee files a petition in bankruptcy, or an involuntary petition in bankruptcy is filed against Franchisee or a receiver is appointed for Franchisee's business, or a final judgment remains unsatisfied or of record for thirty (30) days or longer; or if Franchisee is a corporation, limited liability company or partnership, Franchisee is dissolved;
(4) Franchisee voluntarily or otherwise abandons the Studio.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, an 'assignment for the benefit of creditors' is a specific event that can lead to the immediate termination of the franchise agreement by Bft. This occurs when a franchisee, facing financial difficulties, transfers their assets to a third party (the assignee) who is then responsible for liquidating the assets and distributing the proceeds to the franchisee's creditors. This action indicates that the franchisee is unable to manage their financial obligations and is taking steps to resolve their debts outside of formal bankruptcy proceedings.
Specifically, Bft can terminate the franchise agreement immediately if the franchisee becomes insolvent due to an inability to pay debts as they become due, or if the franchisee makes an assignment for the benefit of creditors. This also applies if the franchisee admits their inability to pay obligations as they become due. These conditions allow Bft to protect its brand and the interests of other franchisees by disassociating itself from a financially unstable franchisee.
This provision is a standard protective measure in franchise agreements. It allows Bft to promptly terminate the agreement without offering an opportunity to cure the default, which is a more severe consequence than other types of breaches where a cure period might be granted. The immediate termination underscores the importance Bft places on the financial stability and responsibility of its franchisees. A prospective franchisee should understand that financial distress leading to such an assignment can result in the immediate loss of their franchise.