If a Cicis franchisee makes a general assignment for the benefit of creditors, what are the consequences?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) you or any Person who guarantees your obligations under this Agreement (i) admits, in writing, your or its insolvency or inability to pay your or its debts as they become due, (ii) makes a general assignment for the benefit of creditors; (iii) files or has filed against you or it a petition under any bankruptcy law, receivership or custodian law, insolvency law, foreclosure law, or any similar Law or statute of the United States or any state thereof intended to protect the rights of your or its creditors; (iv) has a final judgment against you or it that remains unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed); or (v) is dissolved or wound down;
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if a franchisee or any person who guarantees their obligations admits in writing their insolvency or inability to pay debts, makes a general assignment for the benefit of creditors, files or has filed against them a petition under any bankruptcy law, receivership or custodian law, insolvency law, foreclosure law, or any similar law, has a final judgment against them that remains unsatisfied for 30 days or longer, or is dissolved or wound down, it constitutes an event of default.
This means that Cicis has the right to terminate the Franchise Agreement if the franchisee becomes insolvent or takes actions indicating financial distress. A "general assignment for the benefit of creditors" is a legal process where a debtor transfers assets to an assignee who then liquidates the assets and distributes the proceeds to creditors.
For a prospective Cicis franchisee, this highlights the importance of maintaining financial stability. Defaulting on financial obligations can lead to the termination of the franchise agreement, resulting in the loss of the business and potentially significant financial losses. Franchisees should carefully manage their finances and seek professional advice if they encounter financial difficulties to avoid such consequences.