What federal law might govern aspects of the Big Apple Bagels agreement?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
The BAGELS Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The BAGELS Franchise Agreement requires binding arbitration. The arbitration will occur in Chicago, Illinois with the costs being borne by the losing party. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.05, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a BAGELS Franchise Agreement restricting venue to a forum outside the State of California.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels's 2025 Franchise Disclosure Document, federal bankruptcy law may affect the enforceability of termination provisions within the franchise agreement. Specifically, the document indicates that a clause allowing termination upon bankruptcy might not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
This means that if a Big Apple Bagels franchisee declares bankruptcy, the franchisor's ability to terminate the franchise agreement based solely on that bankruptcy may be limited. Federal bankruptcy law is designed to provide certain protections to debtors, and these protections could override the standard termination clauses found in the Big Apple Bagels franchise agreement.
Furthermore, the document advises prospective franchisees to seek legal counsel to understand how federal laws, including the Federal Arbitration Act, might apply to provisions in the franchise agreement, especially those that restrict venue to a forum outside of California. This highlights the importance of franchisees understanding their rights and obligations under both the franchise agreement and applicable federal laws.
In essence, while the Big Apple Bagels franchise agreement is a legally binding document, certain provisions may be superseded or modified by federal laws like bankruptcy law. Franchisees should be aware of these potential conflicts and seek legal advice to ensure they fully understand their rights and responsibilities.