Is the Cinnaholic Franchise Agreement's provision for termination upon bankruptcy enforceable in Maryland?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement and Development Agreement each provide for termination upon your bankruptcy. This provision might not be enforceable under federal bankruptcy law (11. U.S.C. Sections 101 et seq.), but we will enforce it to the extent enforceable.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the Franchise Agreement and Development Agreement both allow for termination upon a franchisee's bankruptcy. However, the FDD states that this provision's enforceability is uncertain under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).
Specifically for Maryland franchisees, Cinnaholic acknowledges that while they will attempt to enforce the termination-upon-bankruptcy clause to the extent permitted, its enforceability is not guaranteed. This means that a Maryland franchisee's bankruptcy might not automatically lead to the termination of their franchise agreement, as federal bankruptcy law could supersede this provision.
Prospective Cinnaholic franchisees in Maryland should be aware of this uncertainty and consult with a legal professional to understand their rights and obligations in the event of bankruptcy. It is important to note that federal bankruptcy law will ultimately determine whether Cinnaholic can terminate the franchise agreement based solely on the franchisee's bankruptcy filing.