What constitutes insolvency for a Cordova franchisee that would lead to automatic termination?
Cordova Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) Defaults and Automatic Termination At the election of Franchisor, Franchisee shall be in default of this Agreement and this Agreement shall be automatically and immediately terminated, without notice to Franchisee and without providing Franchisee any opportunity to cure, upon the occurrence of any one or more of the following actions, inactions, omissions, events, and/or circumstances:
- (a) Franchisee becomes insolvent, and/or Franchisee makes a general assignment for the benefit of creditors or takes any other similar action for the protection or benefit of creditors;
- (b) Franchisee admits in writing Franchisee's inability to pay its debts as they mature, and/or Franchisee gives notice to any governmental body or agency of insolvency, pending insolvency, suspension of operations and/or pending suspension of operations;
- (c) Franchisee files a voluntary petition in bankruptcy, Franchisee is adjudicated bankrupt or insolvent, and/or Franchisee files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any applicable federal and/or state law relative to bankruptcy, insolvency or similar relief for debtors;
- (d) An involuntary petition in bankruptcy is filed against Franchisee and Franchisee fails to have the involuntary petition discharged within 35 days of the petition filing, and/or Franchisee seeks, consents to, or acquiesces in, the appointment of any trustee, receiver, conservator, custodian or liquidator for Franchisee's business or any assets of Franchisee;
(e) A bill in equity or other proceeding for the appointment of any trustee, receiver, conservator, custodian or liquidator of Franchisee for Franchisee's business or any assets of Franchisee is filed and Franchisee consents to same;
Source: Item 23 — RECEIPTS (FDD pages 44–195)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, a franchisee can be in default of their agreement, leading to automatic and immediate termination without notice or an opportunity to cure, if they become insolvent. This also applies if the franchisee makes a general assignment for the benefit of creditors or takes any similar action for the protection or benefit of creditors.
Further, the franchise agreement can be terminated immediately if a Cordova franchisee admits in writing their inability to pay debts as they mature or if they notify any governmental body or agency of insolvency, pending insolvency, suspension of operations, or pending suspension of operations. Filing a voluntary petition in bankruptcy, being adjudicated bankrupt or insolvent, or filing any petition seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under federal or state law related to bankruptcy or insolvency also triggers immediate termination.
Additionally, if an involuntary petition in bankruptcy is filed against the Cordova franchisee and they fail to have it discharged within 35 days, or if the franchisee seeks, consents to, or acquiesces in the appointment of any trustee, receiver, conservator, custodian, or liquidator for their business or assets, the franchise agreement can be terminated immediately. Similarly, if a bill in equity or other proceeding is filed for the appointment of any trustee, receiver, conservator, custodian, or liquidator of the franchisee and the franchisee consents to it, the agreement can be terminated immediately.