Under what circumstances related to bankruptcy might the termination provision in the Embassy Suites Franchise Agreement not be enforceable?

According to the 2025 Embassy Suites Franchise Disclosure Document, the standard franchise agreement includes a provision that allows Embassy Suites to terminate the agreement if the franchisee declares bankruptcy. However, this termination provision may not be enforceable due to federal bankruptcy laws. Specifically, the FDD cites U.S. Bankruptcy Code (11 U.S.C. Section 101 et seq.) as the reason the provision might be unenforceable.

This means that if an Embassy Suites franchisee files for bankruptcy, the bankruptcy court might prevent Embassy Suites from terminating the franchise agreement. The franchisee may be able to continue operating the business while under bankruptcy protection, which could allow them to reorganize their finances and potentially emerge from bankruptcy while retaining the franchise.

Prospective franchisees should be aware that bankruptcy laws are complex and subject to change. It is advisable to consult with a legal professional experienced in franchise law and bankruptcy to fully understand their rights and obligations in the event of financial distress. This is particularly important given that the franchisor's standard agreement may not always be fully enforceable in bankruptcy proceedings.