What happens if a Clean Your Dirty Face franchisee admits in writing their insolvency?
Clean_Your_Dirty_Face Franchise · 2025 FDDAnswer from 2025 FDD Document
- you make an assignment for the benefit of creditors or admit in writing your insolvency or inability to pay your debts generally as they become due; you consent to the appointment of a receiver, trustee, or liquidator of all or the substantial part of your property; your Business is attached, seized, subjected to a writ or distress warrant, or levied on, unless the attachment, seizure, writ, warrant, or levy is vacated within thirty (30) days; or any order appointing a receiver, trustee, or liquidator of you or your Business is not vacated within thirty (30) days following the order's entry;
Source: Item 22 — CONTRACTS (FDD page 54)
What This Means (2025 FDD)
According to Clean Your Dirty Face's 2025 Franchise Disclosure Document, if a franchisee admits in writing their insolvency, it constitutes a default under the franchise agreement. This has significant implications for the franchisee, potentially leading to termination of the agreement.
Specifically, the FDD states that admitting insolvency in writing is one of several conditions that trigger a default. Other conditions include making an assignment for the benefit of creditors or consenting to the appointment of a receiver, trustee, or liquidator. The franchisee's business being attached, seized, or levied on, and failing to vacate the attachment within thirty days, also constitutes a default.
These default conditions are fairly standard in franchise agreements, designed to protect the franchisor's brand and system. If a Clean Your Dirty Face franchisee is in financial distress, it could negatively impact the brand's reputation and the performance of other franchisees. Therefore, Clean Your Dirty Face has the right to terminate the agreement to mitigate these risks. A prospective franchisee should be aware of these conditions and ensure they have a solid financial plan to avoid such situations.