What happens to the Carbones Pizzeria franchise agreement if the franchisee declares bankruptcy?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor may terminate this Agreement on the happening of any one of the following events:
- a. Franchisee voluntary abandons the Franchise relationship, the Restaurant or its business;
- b. Conviction of Franchisee (or of a principal officer, director, principal shareholder, or partner of Franchisee) or entry by any of the same of a plea of guilty or of no contest in a court of competent jurisdiction, of an offense;
- c. Any action of Franchisee which substantially impairs the good will associated with Franchisor's Names and Marks if Franchisee has not terminated such action within twenty-four (24) hours after receipt of written notice demanding that Franchisee terminate such action and cure the default caused thereby;
- d. Bankruptcy or insolvency of Franchisee or an assignment for the benefit of Franchisee's creditors;
- e. Material breach of the terms and conditions of this Agreement other than a failure to make payments; or
- f. Failure of Franchisee to make payment to Franchisor of any Royalty, Advertising Fees or other amounts (including interest) due to Franchisor pursuant to the terms of this Agreement.
Termination for the events described in items (a) through (d) shall occur immediately upon receipt of written notice. Termination for the events described in item I shall occur if Franchisee fails to correct the breach within thirty (30) days after notice from Franchisor. Termination for the events described in item (f) shall occur if Franchisee fails to cure such payment default within ten (10) days of notice from Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 30–116)
What This Means (2025 FDD)
According to the 2025 Carbones Pizzeria Franchise Disclosure Document, the franchise agreement can be terminated immediately if the franchisee declares bankruptcy or becomes insolvent. This is explicitly stated as one of the conditions under which the franchisor may terminate the agreement.
Specifically, the FDD states that "Bankruptcy or insolvency of Franchisee or an assignment for the benefit of Franchisee's creditors" allows the franchisor to terminate the agreement. Termination in such cases is effective immediately upon the franchisee receiving written notice from Carbones Pizzeria.
This clause is a fairly standard inclusion in franchise agreements. It protects Carbones Pizzeria from the risks associated with a franchisee's financial instability. Bankruptcy can disrupt operations and damage the brand's reputation, so the franchisor retains the right to terminate the agreement to mitigate these potential negative impacts.