If a Bombs Away franchisee is adjudicated bankrupt, can Bombs Away Franchising terminate the agreement?
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, Bombs Away Franchising can terminate the franchise agreement without allowing an opportunity to cure if a franchisee is adjudicated bankrupt. This means that if a court declares the franchisee bankrupt, Bombs Away has the right to immediately terminate the agreement.
This provision protects Bombs Away from the risks associated with a franchisee's financial instability. Bankruptcy can impact the franchisee's ability to meet their obligations under the agreement, potentially harming the Bombs Away brand and reputation. By including bankruptcy as a cause for immediate termination, Bombs Away aims to mitigate these risks.
For a prospective Bombs Away franchisee, this clause highlights the importance of maintaining financial stability. It underscores the need for careful financial planning and management to avoid circumstances that could lead to bankruptcy and subsequent termination of the franchise agreement. Franchisees should be aware that Bombs Away views bankruptcy as a serious breach that warrants immediate termination, without the possibility of rectifying the situation.