Is the Dryject franchise agreement's provision for termination upon bankruptcy enforceable under federal bankruptcy law?

According to the 2025 Dryject Franchise Disclosure Document, the franchise agreement includes a provision for termination upon the franchisee's bankruptcy. However, the FDD explicitly states that this provision may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C.A. Sec. 101 et seq. This means that despite the clause in the agreement, a court might not uphold Dryject's right to terminate the franchise solely based on the franchisee declaring bankruptcy.

This statement serves as a warning to potential Dryject franchisees. While the franchise agreement might state that bankruptcy is grounds for termination, federal law could override this clause, offering some protection to the franchisee. It is important to note that the FDD does not elaborate on the specific circumstances under which the bankruptcy termination clause might be unenforceable.

Prospective franchisees should seek legal counsel to fully understand their rights and obligations in case of financial distress or bankruptcy. Understanding the interplay between the franchise agreement and federal bankruptcy law is crucial for assessing the risks and potential outcomes associated with the Dryject franchise. Franchisees should inquire with Dryject about what specific conditions would trigger termination, and under what conditions Dryject would allow a bankrupt franchisee to continue operations.