Under what circumstance related to bankruptcy might the Deck Medic franchise agreement's termination provision be unenforceable?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
Item 17, "Renewal, Termination, Transfer and Dispute Resolution," is supplemented, by the addition of the following:
- A. The general release required as a condition of renewal, sale, and/or assignment/transfer shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
- B. A Franchisee may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law.
- C. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within three years after the grant of the franchise.
- D. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101, et seq.).
- E. No statement, questionnaire or acknowledgement signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of: (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 23 — RECEIPTS (FDD pages 43–228)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, specifically the Maryland FDD Amendment, a provision in the franchise agreement that allows for termination upon a franchisee's bankruptcy may not be enforceable. This is due to federal bankruptcy law, specifically 11 U.S.C. Section 101, et seq., which may supersede the terms of the franchise agreement in such situations.
For a prospective Deck Medic franchisee in Maryland, this means that even if the franchise agreement states that bankruptcy is grounds for termination, federal law might protect them from losing their franchise under those circumstances. This amendment acknowledges the potential conflict between the franchise agreement's terms and federal bankruptcy protections.
It is important for potential franchisees to understand that federal bankruptcy law is complex, and the enforceability of termination clauses in bankruptcy cases can depend on the specific facts and circumstances. Franchisees facing financial difficulties should seek legal advice to understand their rights and options under both the franchise agreement and federal law.