What happens if a City Publications franchisee becomes insolvent?

According to the 2025 City Publications Franchise Disclosure Document, Section 18B1.h of the Franchise Agreement allows City Publications to terminate the Franchise Agreement upon the bankruptcy of the Franchisee. However, for franchisees in Maryland, this clause may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101, et seq.).

This means that if a City Publications franchisee declares bankruptcy, City Publications may attempt to terminate the franchise agreement. However, federal bankruptcy laws might prevent City Publications from doing so, particularly in Maryland. This discrepancy arises because federal law aims to protect debtors during bankruptcy proceedings, potentially conflicting with the franchisor's standard termination rights.

Prospective franchisees should be aware of this potential conflict and consult with legal counsel to understand their rights and obligations under both the franchise agreement and federal bankruptcy law. This is especially important for franchisees operating in Maryland, where the enforceability of the termination clause is specifically questioned in the FDD. Franchisees should seek clarification from City Publications regarding their policies and procedures in the event of franchisee bankruptcy or insolvency.