If a Chocolate Bash franchisee is adjudicated bankrupt, can CB Franchising terminate the agreement?

According to Chocolate Bash's 2024 Franchise Disclosure Document, whether CB Franchising can terminate the franchise agreement if a franchisee is adjudicated bankrupt depends on the location of the franchise. Specifically, for Chocolate Bash franchises in California, Section 14.2 (c)(iii) of the franchise agreement, which allows termination upon the franchisee's bankruptcy, may not be enforceable under federal bankruptcy law.

This means that if a Chocolate Bash franchisee in California declares bankruptcy, CB Franchising's ability to terminate the agreement is uncertain and subject to federal bankruptcy law. This is a critical consideration for prospective franchisees in California, as federal law would supersede the franchise agreement.

For prospective Chocolate Bash franchisees outside of California, the FDD does not specify any similar restrictions regarding the termination of the franchise agreement due to bankruptcy. Therefore, franchisees outside of California may be subject to the standard termination clauses outlined in the franchise agreement, which could include termination upon adjudication of bankruptcy. Prospective franchisees should consult with a legal professional to fully understand their rights and obligations in the event of bankruptcy.