What happens if a City Publications franchisee commits an affirmative act of insolvency?

According to the 2025 City Publications Franchise Disclosure Document, Section 18B.1.h addresses the termination of the Franchise Agreement upon the bankruptcy of the franchisee. However, the FDD also states that this particular section of the agreement may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C. Section 101, et seq. This means that while the standard franchise agreement allows City Publications to terminate the agreement if a franchisee declares bankruptcy, federal law might override this provision, potentially preventing City Publications from terminating the agreement solely based on the bankruptcy filing. This clause is included in addendums for Virginia and Rhode Island.

For a prospective City Publications franchisee, this information is crucial because it clarifies the conditions under which the franchise agreement can be terminated. While the agreement initially stipulates that bankruptcy can lead to termination, the disclosure indicates that federal law might protect the franchisee in such a situation. This provides a degree of security, suggesting that bankruptcy alone may not automatically result in the loss of the franchise.

It is important for potential franchisees to seek legal counsel to fully understand their rights and obligations under both the franchise agreement and federal bankruptcy law. This is especially pertinent given the disclaimer about the enforceability of the termination clause. Understanding these protections can inform a franchisee's decisions and strategies if they face financial difficulties during the term of their agreement with City Publications.