Under what circumstances might the provision in the Burger King Franchise Agreement that terminates the franchise upon the bankruptcy of the Developer not be enforceable?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
AMENDMENT TO DEVELOPMENT AGREEMENT REQUIRED BY THE STATE OF CALIFORNIA
Notwithstanding anything to the contrary set forth in the Development Agreement, the following provisions shall supersede and apply to all BURGER KING franchises offered and sold in the State of California:
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- The Development Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. § 101 et seq.).
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, there are specific circumstances where the provision allowing termination of the franchise agreement upon the franchisee's bankruptcy may not be enforceable. For franchisees operating in California, an amendment to the franchise agreement states that this provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. § 101 et seq.).
Similarly, for franchisees in Illinois, the FDD includes an amendment stating that the provision in the Franchise Agreement which terminates the franchise upon the bankruptcy of the Franchisee may not be enforceable under Title 11, United States Code, Section 101.
For franchisees in Maryland, a similar amendment states that Section 18 of the Franchise Agreement is revised to provide that termination upon bankruptcy might not be enforceable under the U.S. Bankruptcy Act, but BKC intends to enforce it to the extent enforceable. This suggests that while Burger King acknowledges the potential unenforceability, they may still attempt to enforce the clause where legally possible. Prospective franchisees should consult with a legal expert to understand their rights and obligations in case of bankruptcy, especially in light of these state-specific amendments.