In California, is the Cinnaholic franchise agreement provision for termination upon bankruptcy always enforceable?

According to Cinnaholic's 2025 Franchise Disclosure Document, the franchise agreement and development agreement both contain provisions for termination upon bankruptcy. However, this provision may not be enforceable under federal bankruptcy law (11 U.S.C. Sec. 101 et seq.). This means that while Cinnaholic includes this clause in its agreements, a court applying federal law might not uphold it if a franchisee declares bankruptcy.

California's Franchise Investment Law reinforces this by stating that any provision requiring a franchisee to waive specific provisions of the law is against public policy and therefore void and unenforceable. This protection extends to representations made by Cinnaholic, the franchisee's reliance on those representations, and any violations of the law.

In practical terms, a Cinnaholic franchisee in California who faces bankruptcy might find that the franchise agreement's termination clause is not automatically enforced. Federal bankruptcy law and California's franchise laws could provide some protection, preventing Cinnaholic from immediately terminating the agreement. However, the franchisor may still attempt to enforce the clause to the extent permitted by law.