What happens to the Crave franchise agreement if a petition in bankruptcy is filed against the franchisee and not opposed?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.1.8 If any of you shall become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by you or such a petition is filed against and not opposed by you; if you are adjudicated a bankrupt or insolvent; if a bill in equity or other proceeding for the appointment of a receiver or other custodian for you or your business or assets is filed and consented to by you; if a receiver or other custodian (permanent or temporary) of your assets or property, or any part thereof, is appointed by any court of competent jurisdiction; if proceedings for a composition with creditors under any state or federal law should be instituted by or against you; if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a supersedeas bond is filed); if execution is levied against your business or property; if suit to foreclose any lien or mortgage against the premises or equipment is instituted against you and not dismissed within thirty (30) days; or if the real or personal property of the business shall be sold after levy thereupon by any sheriff, marshal, or constable.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, if a petition in bankruptcy is filed against a franchisee and the franchisee does not oppose it, this constitutes grounds for termination of the franchise agreement. This is part of a broader set of conditions that can trigger termination related to financial instability.
Specifically, the FDD states that the franchise agreement can be terminated if a franchisee becomes insolvent, makes an assignment for the benefit of creditors, has a bankruptcy petition filed against them that they do not oppose, is adjudicated bankrupt or insolvent, consents to the appointment of a receiver for their business, institutes proceedings for composition with creditors, has a final judgment unsatisfied for 30 days, has an execution levied against their business, or has foreclosure proceedings instituted against their property that are not dismissed within 30 days. These conditions all indicate severe financial distress that could impact the franchisee's ability to operate the Crave business effectively.
However, the addendum for Maryland franchisees states that the provisions in the Franchise Agreement which provide for termination upon bankruptcy of the franchisee may not be enforceable under federal bankruptcy law. This means that while Crave's standard agreement allows for termination in case of bankruptcy, federal law might override this provision, offering some protection to franchisees in Maryland. Prospective franchisees should consult with a legal expert to fully understand their rights and obligations in case of bankruptcy, especially considering the interplay between the franchise agreement and federal bankruptcy laws.