What happens if proceedings for composition with creditors are instituted against a Crave franchisee?
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 proceedings for composition with creditors are instituted by or against a franchisee under any state or federal law, it can lead to the termination of the franchise agreement. This is outlined as one of several conditions that could trigger a termination event.
Specifically, the FDD states that if a franchisee institutes proceedings for a composition with creditors, or such proceedings are instituted against them, this constitutes grounds for termination. This clause protects Crave from potential financial instability or mismanagement on the part of the franchisee that could negatively impact the brand.
This provision is fairly standard in franchise agreements, as franchisors need to protect their brand and system from franchisees facing severe financial difficulties. A franchisee's insolvency or inability to meet financial obligations can harm the reputation of the entire franchise system. It is important for prospective Crave franchisees to understand these conditions and maintain sound financial management to avoid potential termination of their franchise agreement.