In Wisconsin, how might bankruptcy affect the enforceability of a Caring Transitions franchise agreement provision that terminates the franchise upon the franchisee's bankruptcy?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
ture of Franchisee Signature of Franchisor Representative Representative Title of Franchisee Representative Title of Franchisor Representative
WISCONSIN
The following additional disclosures are required by the Wisconsin Franchise Investment Law and the Wisconsin Fair Dealership Law:
THE WISCONSIN FAIR DEALERSHIP LAW SUPERSEDES ANY PROVISION OF THE FRANCHISE AGREEMENT THAT IS INCONSISTENT WITH THAT LAW. THE STATE OF WISCONSIN MAY ALSO HAVE COURT DECISIONS WHICH MAY SUPERSEDE THE FRANCHISE RELATIONSHIP IN RELATIONSHIP WITH THE FRANCHISOR, INCLUDING THE AREAS OF TERMINATION AND RENEWAL OF YOUR FRANCHISE. THE STATE OF WISCONSIN MAY HAVE COURT DECISIONS WHICH RESTRICT THE IMPOSITION OF LIQUIDATED DAMAGES. THE IMPOSITION OF LIQUIDATED DAMAGES IS ALSO RESTRICTED BY FAIR PRACTICE LAWS, CONTRACT LAW, AND STATE AND FEDERAL COURT DECISIONS. A PROVISION IN THE FRANCHISE AGREEMENT WHICH TERMINATED THE FRANCHISE UPON THE BANKRUPTCY OF THE FRANCHISEE MAY NOT BE ENFORCEABLE UNDER TITLE 11, UNITED STATES CODE §101. THE STATE OF WISCONSIN MAY HAVE COURT DECISIONS LIMITING THE FRANCHISOR'S ABILITY TO RESTRICT YOUR ACTIVITY AFTER THE FRANCHISE AGREEMENT HAS ENDED.
We may revoke our approval of any previously approved supplier at any time if the quality of the product or the supplier's financial condition or ability to satisfy your requirements do not continue to meet our satisfaction.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, Wisconsin's Franchise Investment Law and the Wisconsin Fair Dealership Law include provisions that may supersede the standard franchise agreement. Specifically, a clause in the franchise agreement that automatically terminates the franchise if the franchisee declares bankruptcy may not be enforceable under Title 11 of the United States Code §101. This means that despite what the franchise agreement says, a Wisconsin franchisee's bankruptcy might not necessarily lead to termination of the franchise.
This protection is due to the Wisconsin Fair Dealership Law, which takes precedence over any conflicting terms in the Caring Transitions franchise agreement. Additionally, Wisconsin courts may have decisions that further restrict the franchisor's rights regarding termination. The Wisconsin Addendum to the Franchise Agreement also confirms that Chapter 135 of Wisconsin Statutes, the Wisconsin Fair Dealership Law, supersedes any inconsistent provisions in the franchise agreement.
For a prospective Caring Transitions franchisee in Wisconsin, this is a significant safeguard. It suggests that in the event of financial distress leading to bankruptcy, the franchisee may have legal grounds to prevent the franchisor from terminating the agreement solely based on the bankruptcy filing. This could provide an opportunity to reorganize finances and continue operating the franchise. However, franchisees should seek legal counsel to fully understand their rights and obligations under both the franchise agreement and Wisconsin state laws.