Under what condition related to insolvency or bankruptcy might the termination of the Dq Treat Operating Agreement by ADQ not be enforceable in California?

According to Dq Treat's 2025 Franchise Disclosure Document, the enforceability of the Operating Agreement termination due to insolvency or bankruptcy is subject to federal law. Specifically, Item 17 of the addendum to the disclosure document for the state of California indicates that the termination of the Operating Agreement by ADQ (presumably referring to American Dairy Queen Corporation) because of the franchisee's insolvency or bankruptcy may not be enforceable under applicable federal law, specifically citing 11 U.S.C.A. 101 et seq., which refers to the United States Bankruptcy Code.

This means that if a Dq Treat franchisee in California declares bankruptcy or becomes insolvent, ADQ's right to terminate the franchise agreement may be restricted or prevented by federal bankruptcy laws. These laws are designed to provide certain protections to debtors, including franchisees, and may override specific termination clauses in the franchise agreement.

For a prospective Dq Treat franchisee, this information is crucial because it highlights a potential legal safeguard in the event of severe financial distress. While it doesn't prevent ADQ from attempting to terminate the agreement, it does mean that a franchisee may have legal recourse to challenge the termination in bankruptcy court. It is advisable for potential franchisees to consult with legal counsel to fully understand their rights and obligations under both the franchise agreement and federal bankruptcy laws.