Under what conditions related to insolvency can the Buona franchise agreement be terminated without notice?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.1 Termination Without Notice Due To Insolvency. Franchisee shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Franchisee, if Franchisee shall become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee or such a petition is filed against Franchisee and not opposed by Franchisee; if Franchisee is adjudicated bankrupt or insolvent; if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; if proceedings for a composition with creditors under applicable law of any jurisdiction should be instituted by Franchisee or against Franchisee and not opposed by Franchisee; if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a supersedeas bond is filed); if Franchisee is dissolved; if execution is levied against Franchisee's property or business; if suit to foreclose any lien or mortgage against the premises or equipment of the Franchised Business is instituted against Franchisee and not dismissed within thirty (30) days; or if the real or personal property of the Franchised Business shall be sold after levy thereon by any sheriff, marshal or constable.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the franchise agreement can be terminated without notice if the franchisee becomes insolvent or takes certain actions indicative of financial distress. This is a significant risk for franchisees, as it means Buona can terminate the agreement immediately if any of these conditions are met.
Specifically, Buona can terminate the agreement without notice if the franchisee: becomes insolvent; makes a general assignment for the benefit of creditors; has a bankruptcy petition filed by or against them (unless opposed); is adjudicated bankrupt or insolvent; has a receiver or custodian appointed for their assets; institutes proceedings for composition with creditors; has a final judgment that remains unsatisfied for 30 days or longer (unless a supersedeas bond is filed); is dissolved; has an execution levied against their property or business; faces a foreclosure suit against the premises or equipment that is not dismissed within 30 days; or has the real or personal property of the franchised business sold after levy by a sheriff, marshal, or constable.
These conditions are fairly standard in franchise agreements, as franchisors need to protect their brand and system from the negative impacts of a franchisee's financial instability. However, the lack of a notice period or opportunity to cure the default places a significant burden on the franchisee. A prospective Buona franchisee should carefully consider their financial stability and ability to manage their business to avoid these situations, as any of these events could lead to immediate termination of the franchise agreement.