What happens if a Brain Balance franchisee files for bankruptcy?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
(j) FRANCHISEE is in breach of any of the terms or conditions of the Software Agreement;
(k) FRANCHISEE is in breach of any of the agreements with supplier(s) designated by COMPANY for purchase of equipment, advertising materials, services or other supplies, products, and materials required for the operation of the Franchised Business; or
(l) FRANCHISEE abandons, fails to renew, or otherwise loses the right to operate or stops operating the Standard Brain Balance Center and fails to convert the Franchised Business into a standard Brain Balance Center within a period of 30 days from the date of non-operation of the Standard Brain Balance Center.
17.03. (a) Upon the occurrence of an Event of Default, COMPANY, at its option, may terminate this Agreement on five (5) days' written notice (or a notice for a longer period of time as may be required by the law of the jurisdiction in which FRANCHISEE's Center is located) without a right to cure, and this Agreement, together with the Franchise granted hereunder, shall thereupon expire.
(b) Upon the occurrence of an Event of Default that continues for thirty (30) or more days of COMPANY giving FRANCHISE notice of such default, COMPANY shall have the absolute right without additional notice, to cease providing or making available any or all services and benefits provided for hereunder to FRANCHISEE until FRANCHISEE is current in the payment of fees and the filing of reports and has cured all other defaults.
COMPANY's exercise of such right shall not diminish FRANCHISEE's continuing obligations under this Agreement or constitute an actual or constructive termination of this Agreement.
- 17.04.
Upon the termination of this Agreement, whether as a result of an Event of Default or for any other reason, FRANCHISEE shall:
(a) Cease to be a FRANCHISEE, cease to operate the Franchised Business, and refrain and desist from using the names and Marks and all other marks, trade names, trademarks, or logos of COMPANY, or such names or logos similar thereto, in any manner whatsoever, including, without limitation, together with other words such as "formerly known as."
(b) Promptly change FRANCHISEE's name to a name that does not include the words "Brain Balance®" or "BBF" or any of the Marks or any words similar thereto.
(c) Promptly pay to COMPANY all debts, including any outstanding Royalty and Advertising Fund contribution, arising from FRANCHISEE's obligations under this Agreement, which shall upon termination for any default by FRANCHISEE include all damages, costs, and expenses, including reasonable attorney's fees, incurred by COMPANY in obtaining injunctive relief for the enforcement of any provision of this Agreement as a result of the default and all Royalty and Advertising Fund contributions for the entire unperformed term of this Agreement.
(d) Promptly endeavor to collect all accounts receivable and file reports with respect thereto that derive from services provided by FRANCHISEE pursuant to this Agreement whether before or after termination of this Agreement and pay COMPANY any Royalty or Advertising Fund contribution due thereon in the amount and manner required by this Agreement.
(e) Deliver to COMPANY (electronically, if so requested by COMPANY) within ten (10) days of termination: (i) all files and records in respect to client services, research and development data provided to, or maintained by, FRANCHISEE through the System; (ii) all records, lists, and information concerning or relating to client accounts and prospective clients, and employees of FRANCHISEE; (iii) all other information maintained by FRANCHISEE, whether in written or electronic form, with respect to said clients, prospective clients, and employees; and (iv) all copies of COMPANY's Operations Manual, video tapes, and all other materials bearing the Marks or otherwise belonging to COMPANY.
- (f) Immediately refrain and desist from the use of the Franchised Business's telephone number or numbers and, at the option of COMPANY, transfer and assign the right to use such number or numbers to COMPANY or COMPANY's designee and to take such action as may be required by BBF to transfer and assign to BBF or its designee all telephone numbers and white and yellow page telephone references and advertisements as set forth on the Conditional Assignment of Telephone Numbers annexed hereto as Exhibit 4.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
Based on the 2025 Brain Balance Franchise Disclosure Document, the FDD does not explicitly state what happens if a franchisee files for bankruptcy. However, the document does outline several events of default that could lead to the termination of the franchise agreement. These include breaching the franchise agreement, software agreement, or agreements with designated suppliers, as well as abandoning the Brain Balance Center.
According to the FDD, if a franchisee defaults on any of the agreements, Brain Balance has the option to terminate the agreement with written notice. Upon termination, the franchisee must cease operating the franchised business, stop using Brain Balance's names and marks, and fulfill certain financial obligations, such as paying outstanding royalties and advertising fund contributions. The franchisee is also required to return all confidential information and materials to Brain Balance.
While the FDD does not directly address bankruptcy, the default provisions suggest that financial instability leading to unfulfilled obligations could trigger termination. A prospective franchisee should seek clarification from Brain Balance regarding the specific procedures and consequences related to bankruptcy to fully understand their rights and obligations in such a situation.