Does the Engel & Volkers Franchise Agreement's provision for termination upon bankruptcy have any potential issues under federal law?

According to Engel & Volkers's 2025 Franchise Disclosure Document, the Franchise Agreement includes a provision that allows for termination of the agreement upon the franchisee's bankruptcy. However, 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 what the Engel & Volkers Franchise Agreement says, federal law might prevent Engel & Volkers from terminating the agreement solely due to the franchisee declaring bankruptcy.

This is a critical consideration for potential Engel & Volkers franchisees. Federal bankruptcy law is designed to protect debtors, and certain clauses that automatically terminate contracts upon bankruptcy are often deemed unenforceable. The franchisor's acknowledgement of this potential issue suggests they are aware that a court could rule the termination clause invalid.

Prospective franchisees should seek legal counsel to fully understand their rights and obligations under both the Franchise Agreement and federal bankruptcy law. It would be prudent to discuss with Engel & Volkers how they have handled similar situations in the past and what their specific policies are regarding franchisees who file for bankruptcy. Understanding the interplay between the franchise agreement and federal law is essential for assessing the risks and benefits of investing in an Engel & Volkers franchise.