Does the Camp Margaritaville franchise agreement provision for termination upon bankruptcy have enforceability limitations under federal bankruptcy law?

According to the 2025 Camp Margaritaville Franchise Disclosure Document, the franchise agreement's provision allowing termination upon the franchisee's bankruptcy may not be enforceable under federal bankruptcy law. Specifically, the addendum for the state of Virginia states that this provision may not be enforceable under 11 U.S.C. Section 101, et seq.

This means that if a Camp Margaritaville franchisee declares bankruptcy, the franchisor's ability to automatically terminate the franchise agreement might be restricted by federal law. Federal bankruptcy laws are designed to protect debtors and provide them with an opportunity to reorganize their finances. Certain clauses in contracts, including franchise agreements, that allow for termination solely due to bankruptcy are often unenforceable.

Prospective franchisees should be aware that while the franchise agreement might contain a clause allowing termination upon bankruptcy, this clause's enforceability is questionable. Franchisees facing financial difficulties should consult with a legal professional to understand their rights and options under federal bankruptcy law. This addendum serves as a notification to franchisees in Virginia about the potential limitations on the franchisor's rights in the event of bankruptcy.