To what extent will Cream enforce the termination provision in the Franchise Agreement and Area Development Agreement upon a franchisee's bankruptcy in Maryland?

According to Cream's 2025 Franchise Disclosure Document, the enforceability of termination provisions related to bankruptcy in Maryland is limited. While the Franchise Agreement and Area Development Agreement do contain provisions for termination upon a franchisee's bankruptcy, Cream acknowledges that these provisions might not be fully enforceable under federal bankruptcy law, specifically citing 11 U.S.C. Sections 101 et seq. However, Cream states that it will enforce the termination provisions to the extent that they are enforceable.

For a prospective Cream franchisee in Maryland, this means that while Cream includes bankruptcy as a potential cause for termination in its agreements, the actual enforcement of this clause is subject to federal bankruptcy law. Federal law may override the franchise agreement, potentially preventing Cream from terminating the agreement solely based on the franchisee's bankruptcy filing. This provides some protection to franchisees facing financial difficulties.

It is important for potential franchisees to understand that the enforceability of such clauses can be complex and fact-dependent. Franchisees should seek legal counsel to fully understand their rights and obligations under both the franchise agreement and federal bankruptcy law. This is especially crucial in Maryland, where specific state laws regarding franchise relationships may also interact with these federal regulations. Cream's willingness to enforce the clause only to the extent enforceable suggests a recognition of the legal limitations imposed by federal law.