What constitutes a material default for a Devon Creek franchisee?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
17. DEFAULTS
- 17.1 Default and Automatic Termination.
Franchisee shall be deemed to be in material default under this Agreement, and all rights granted herein shall automatically terminate without notice to Franchisee, if Franchisee or Principal shall become insolvent or makes a general assignment for the benefit of creditors; or if Franchisee or Principal files a voluntary petition under any section or chapter of federal bankruptcy law or under any similar law or statute of the United States or any state thereof, or admits in writing an inability to pay debts when due; or if Franchisee or Principal is adjudicated a bankrupt or insolvent in proceedings filed against Franchisee or Principal under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state; or if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or Principal or other custodian for Franchisee's business or assets is filed and consented to by Franchisee or Principal; or if a receiver or other custodian (permanent or temporary) of Franchisee's or Principal's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee or Principal; or i
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, a franchisee will be considered in material default, leading to automatic termination of the franchise agreement without notice, under specific financial circumstances. These circumstances include insolvency, making a general assignment for the benefit of creditors, or filing a voluntary petition under federal bankruptcy law. This also applies if the franchisee admits in writing their inability to pay debts when due, or is adjudicated bankrupt or insolvent in proceedings filed against them.
Further conditions that trigger material default include the filing of a bill in equity or other proceeding for the appointment of a receiver of the franchisee, if the franchisee consents to it. The appointment of a receiver or custodian for the franchisee's assets by a court of competent jurisdiction also constitutes a material default. Similarly, the institution of proceedings for a composition with creditors under any state or federal law, either by or against the franchisee, will be considered a material default.
These conditions are fairly standard in franchise agreements, as they directly impact the franchisee's ability to meet their financial obligations and maintain the operational standards of the Devon Creek franchise. Prospective franchisees should carefully consider these default conditions and ensure they have a solid financial plan to avoid such situations, as these defaults lead to immediate termination without prior notice.