What actions related to bankruptcy can lead to the automatic termination of the Cream franchise agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement and all rights granted to you in this Agreement shall automatically terminate without notice if: (1) you make an assignment for the benefit of creditors; (2) you consent to the appointment of a receiver, trustee, or liquidator of all or the substantial part of your property; (3) your Shop is attached, seized, subjected to a writ or distress warrant, or levied upon, unless the attachment, seizure, writ, warrant, or levy is vacated within 30 days; (4) any order appointing a receiver, trustee, or liquidator of you or your Shop is not vacated within 30 days following the order's entry; and/or (5) you or any of your owners file a petition in bankruptcy or a petition in bankruptcy is filed against you.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the franchise agreement can be automatically terminated without notice if certain bankruptcy-related events occur. Specifically, the agreement terminates if the franchisee or any of their owners file a petition in bankruptcy, or if a bankruptcy petition is filed against them.
This means that if a franchisee or their owners become insolvent and seek bankruptcy protection, Cream has the right to immediately terminate the franchise agreement. This clause protects Cream from potential financial losses and operational disruptions that could arise from a franchisee's bankruptcy.
It is important for prospective Cream franchisees to understand this automatic termination clause, as it represents a significant risk. Bankruptcy can be a devastating event, and the immediate loss of the franchise could further complicate the franchisee's financial situation. Franchisees should carefully consider their financial stability and risk tolerance before entering into a franchise agreement with Cream. Additionally, franchisees in Maryland should note that while the agreement provides for termination upon bankruptcy, this provision might not be enforceable under federal bankruptcy law.