What happens if a Bor Restoration franchisee becomes insolvent?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
- b. You become insolvent, as that term is commonly defined using generally accepted accounting principles, consistently applied; are adjudicated a bankrupt; if any action is taken by you or by others against you under any insolvency, bankruptcy, or reorganization act; or if you make an assignment for the benefit of creditors or a receiver is appointed by you. This provision may not be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq. If, for any reason, this Franchise Agreement is not terminated under this Article 10, and the Franchise Agreement is assumed, or assignment of the same is made to any Person who has made a bona fide offer to accept an assignment of the Franchise Agreement under the U.S. Bankruptcy Code, then notice of such proposed assignment or assumption, setting forth, (i) the name and address of the proposed assignee; and (ii) all of the terms and conditions of the proposed assignment and assumption; will be given to us within 20 days after receipt of such proposed assignee's offer to accept assignment of the Agreement; and, in any event, within ten days before the date application is made to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption. We will thereupon have the prior right and option, to be exercised by notice given at any time
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, if a franchisee becomes insolvent, as defined by generally accepted accounting principles, it can lead to the termination of the franchise agreement. Specifically, the franchise agreement may be terminated if the franchisee is adjudicated bankrupt, takes action under any insolvency, bankruptcy, or reorganization act, makes an assignment for the benefit of creditors, or has a receiver appointed. However, the FDD notes that this provision may not be enforceable under federal bankruptcy law.
If the Bor Restoration franchise agreement is not terminated and is instead assumed or assigned to someone making a legitimate offer under the U.S. Bankruptcy Code, Bor Restoration must receive notice. This notice must include the name and address of the proposed assignee, along with all terms and conditions of the proposed assignment and assumption. This notification must be provided within 20 days of receiving the offer and at least ten days before applying to a court for approval of the assignment and assumption.
Bor Restoration retains the right to exercise a prior option to accept the assignment by providing notice at any time. This means that even if a franchisee is in bankruptcy, Bor Restoration has the first right to take over the franchise agreement before it is assigned to another party. This clause protects Bor Restoration's interests and ensures they have control over who operates a franchise within their system, even in cases of franchisee insolvency.