In California, what happens if the Buona Franchise Agreement's termination provisions conflict with federal bankruptcy law?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under
federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, California franchisees are protected by California Business and Professions Code Sections 20000 through 20043, which address franchise termination, transfer, and nonrenewal. If any provision in the Buona Franchise Agreement is inconsistent with this law, the California law will take precedence.
Specifically, the FDD notes that the Franchise Agreement allows for termination upon the franchisee's bankruptcy. However, this provision might not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.). This means that federal bankruptcy law could override the termination clause in the Franchise Agreement, potentially preventing Buona from terminating the franchise agreement solely due to the franchisee's bankruptcy.
This protection is significant for prospective Buona franchisees in California, as it provides an additional layer of security in the event of financial distress. Franchisees should consult with legal counsel to fully understand their rights and obligations under both the Franchise Agreement and applicable California and federal laws.