Can an Engel & Volkers franchisee institute proceedings for a composition with creditors without impacting the franchise agreement?

According to Engel & Volkers' 2025 Franchise Disclosure Document, if a franchisee institutes proceedings for a composition with creditors, it can lead to termination of the franchise agreement. Specifically, if proceedings for a composition with creditors under any federal or state law are instituted by or against the Engel & Volkers franchisee, the franchised business, or any affiliate or guarantor, Engel & Volkers has the option to terminate the agreement. This termination can occur without providing the franchisee an opportunity to remedy the situation.

This provision in the franchise agreement means that an Engel & Volkers franchisee's financial stability is critical to maintaining the franchise. If the franchisee, the business, or any related guarantor faces financial distress to the point of needing a composition with creditors, Engel & Volkers can immediately terminate the agreement. This clause protects Engel & Volkers from potential damage to its brand and reputation that could arise from a financially unstable franchisee.

For a prospective Engel & Volkers franchisee, this highlights the importance of thorough financial planning and risk management. It is essential to have a solid financial foundation and contingency plans to avoid situations that could lead to such proceedings. Furthermore, understanding the implications of actions taken by affiliates or guarantors is crucial, as their financial issues could also trigger termination. Franchisees should seek legal and financial advice to fully understand these risks and how to mitigate them.