What happens if a Brain Balance franchisee files for bankruptcy and does not vacate the petition?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
nspect, examine, or audit the Center in accordance with this Agreement;
- (i) An audit of FRANCHISEE'S books and records reflects an understatement of GR as reported to COMPANY of five percent (5%) or more for any calendar year;
- (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.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
Based on the 2025 Brain Balance Franchise Disclosure Document, the document does not specifically state what happens if a franchisee files for bankruptcy and does not vacate the petition. However, the document does outline several events of default that could lead to the termination of the franchise agreement.
According to the FDD, if a franchisee is in breach of any agreements with suppliers designated by Brain Balance for purchasing equipment, advertising materials, services, or other required supplies, it can be considered an event of default. Additionally, breaching the terms of the Software Agreement can also trigger a default. Upon the occurrence of an event of default, Brain Balance has the option to terminate the agreement with only five days' written notice, without granting the franchisee an opportunity to cure the default.
If the franchise agreement is terminated, the franchisee must cease operating the Brain Balance center and discontinue using any of Brain Balance’s trademarks, trade names, or logos. The franchisee must also change the business name to exclude any reference to "Brain Balance" or any similar marks. Furthermore, all debts owed to Brain Balance, including royalties and advertising fund contributions, become immediately due. The franchisee is also responsible for all damages, costs, and expenses, including attorney's fees, incurred by Brain Balance in enforcing the agreement due to the franchisee's default.
To fully understand the implications of filing for bankruptcy, a prospective Brain Balance franchisee should seek clarification from the franchisor regarding the specific policies and procedures that would apply in such a situation. It would also be prudent to consult with a legal professional experienced in franchise law to assess the potential risks and consequences associated with bankruptcy.