Is making an assignment for the benefit of creditors a condition that leads to 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 the 2025 FDD, the Cream franchise agreement can be automatically terminated without notice if the franchisee makes an assignment for the benefit of creditors. This means that if a Cream franchisee transfers their assets to a third party to manage and distribute to their creditors, the franchise agreement is immediately terminated. This is a significant risk for franchisees facing financial difficulties.
This automatic termination clause also applies if the franchisee consents to the appointment of a receiver, trustee, or liquidator for their property, if the Cream shop is attached or seized and not vacated within 30 days, if an order appointing a receiver, trustee, or liquidator is not vacated within 30 days, or if the franchisee files for bankruptcy. These conditions highlight the importance of maintaining financial stability and adhering to legal and financial obligations to avoid losing the franchise.
Automatic termination clauses are relatively common in franchise agreements to protect the brand and ensure consistent operation standards. However, franchisees should be aware of these conditions and seek legal counsel if they anticipate any of these situations arising. Understanding these terms is crucial for managing the risks associated with owning a Cream franchise.