Under what insolvency-related conditions can the Buona franchise agreement be automatically 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 automatically terminated without notice if the franchisee experiences certain insolvency-related events. This means that if a franchisee encounters severe financial difficulties, Buona has the right to immediately terminate the agreement without providing an opportunity to resolve the issues.
Specifically, the agreement can be terminated without notice if the franchisee becomes insolvent, makes a general assignment for the benefit of creditors, files a petition in bankruptcy (or such a petition is filed against them and not opposed), or is adjudicated bankrupt or insolvent. Additionally, the appointment of a receiver or custodian for the franchisee's assets, the institution of proceedings for composition with creditors, or the franchisee's dissolution can also trigger immediate termination.
Furthermore, if a final judgment remains unsatisfied for thirty days or longer (unless a supersedeas bond is filed), if execution is levied against the franchisee's property or business, or if a suit to foreclose any lien or mortgage against the premises or equipment is instituted and not dismissed within thirty days, Buona can terminate the agreement immediately. Similarly, the sale of the franchised business's real or personal property after levy by a sheriff, marshal, or constable also constitutes grounds for immediate termination.
These terms highlight the importance of maintaining financial stability and adhering to legal and financial obligations for Buona franchisees. Failure to do so can result in the immediate loss of the franchise, emphasizing the risks associated with financial distress in the operation of a Buona franchise.