In the event of a Buona developer's voluntary petition for bankruptcy or insolvency, does the Franchisor have any reserved rights?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) if suit to foreclose any lien or mortgage against Developer's premises or business assets is instituted against you and not dismissed within thirty (30) days, or is not in the process of being dismissed; provided, however, that Franchisor reserves the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by you;
Guarantor hereby expressly subordinates any claim Guarantor may have against Developer, upon any account whatsoever, to any claim that Franchisor may now or hereafter have against Developer.
In the event of insolvency and consequent liquidation of the assets of Developer through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Developer applicable to the payment of the claims of both Franchisor and Guarantor shall be paid to Franchisor and shall be first applied by Franchisor to the amounts due to Franchisor from Developer.
Guarantor does hereby assign to Franchisor all claims which they may have or acquire against Developer or against any assignee or trustee in bankruptcy of Developer; provided however, that such assignment shall be effective only for the purpose of assuring to Franchisor full payment of all amounts due under the Franchise Agreement.
Guarantor agrees, and Franchisor is hereby authorized, in the name of Guarantor and from time to time, to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Franchisor deems reasonably
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if a developer files a voluntary petition for bankruptcy or insolvency, Buona retains specific rights. Buona has the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by the developer. This means Buona can seek to control the assets and operations of the developer during the bankruptcy proceedings.
Additionally, any claims the guarantor may have against the developer are subordinate to any claims Buona has against the developer. In the event of insolvency and liquidation of the developer's assets, the assets applicable to the payment of claims of both Buona and the guarantor will be paid to Buona first. This ensures that Buona's financial interests are prioritized over those of the guarantor during the liquidation process.
Furthermore, the guarantor assigns to Buona all claims they may have against the developer or any assignee or trustee in bankruptcy. This assignment is specifically to assure full payment of all amounts due to Buona under the Franchise Agreement. Buona is also authorized to execute and file financing statements and other documents in the name of the guarantor to secure their claims. These provisions collectively strengthen Buona's position in the event of a developer's bankruptcy, safeguarding their financial interests and control over the assets involved.