What happens if a Bombs Away franchisee is unable to pay its debts as they become due?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (c) Without Cure Period. Bombs Away Franchising may terminate this Agreement by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (iii) a receiver or trustee for the Business or all or substantially all of Franchisee's property is appointed by any court, or Franchisee makes a general assignment for the benefit of Franchisee's creditors, or Franchisee is unable to pay its debts as they become due, or a levy or execution is made against the Business, or an attachment or lien remains on the Business for 30 days unless the attachment or lien is being duly contested in good faith by Franchisee, or a petition in bankruptcy is filed by Franchisee, or such a petition is filed against or consented to by Franchisee and the petition is not dismissed within 45 days, or Franchisee is adjudicated as bankrupt;
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, if a franchisee is unable to pay debts as they become due, Bombs Away Franchising can terminate the franchise agreement without providing an opportunity to cure the breach. This means Bombs Away can immediately end the agreement if the franchisee cannot meet their financial obligations.
This provision protects Bombs Away from potential financial instability or reputational damage that could arise from a franchisee's insolvency. It allows Bombs Away to promptly sever ties with a struggling franchisee to safeguard the brand and the interests of other franchisees.
In addition to immediate termination, other events can trigger termination without a cure period, such as misrepresentation of facts in the franchise application, submitting false reports, bankruptcy filings, or failure to open the business by the specified date. These terms are typical in franchise agreements to ensure franchisees meet certain standards and obligations.
Upon termination, Bombs Away has the right, but not the obligation, to purchase the assets of the business. If Bombs Away terminates the agreement due to the franchisee's default, the franchisee must pay liquidated damages to Bombs Away. These damages are calculated based on the average Royalty Fees and Marketing Fund Contributions owed during the 12 months preceding the cessation of business operations, multiplied by either 24 or the number of months remaining in the agreement's term, whichever is less.