Under what insolvency-related circumstances can the Buona franchise agreement be terminated without notice?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the franchise agreement can be terminated without notice if the franchisee faces certain insolvency-related events. Specifically, Buona can terminate the agreement immediately if the franchisee becomes insolvent or makes a general assignment for the benefit of creditors.
Additionally, termination without notice can occur if a petition in bankruptcy is filed by the franchisee or against them, provided the franchisee does not oppose it. The agreement can also be terminated without notice if the franchisee is officially declared bankrupt or insolvent. Furthermore, if a receiver or other custodian is appointed by a court to manage the franchisee's assets or property, or if proceedings for a composition with creditors are instituted by or against the franchisee (and not opposed), Buona can terminate the agreement without prior notice.
These terms are relatively standard in franchising, as franchisors need to protect their brand and system from the instability and potential damage that can arise from a franchisee's financial distress. The absence of a cure period in these insolvency scenarios underscores the severity of the risk Buona associates with such financial difficulties. A prospective franchisee should carefully consider these conditions and ensure they have a solid financial plan to mitigate the risk of such events occurring.