What happens to the Engel & Volkers franchise agreement if the franchisee is adjudicated bankrupt?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- 20.2 Automatic Termination Without Notice.
Franchisee will be in default under this Agreement, and all rights granted in this Agreement will immediately and automatically terminate and revert to Franchisor without notice to Franchisee, if: Franchisee, the franchised Business or any affiliate or Guarantor thereof is adjudicated as bankrupt or insolvent; all or a substantial portion of the assets of the franchised Business are assigned to or for the benefit of any creditor; a petition in bankruptcy is filed by or against Franchisee, the franchised Business and/or any affiliate or Guarantor thereof and is not immediately contested and thereafter dismissed or vacated within sixty (60) days from filing; Franchisee, the franchised Business and any affiliate or Guarantor thereof cause, permit or acquiesce in an order for relief under the U.S.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, if the franchisee, the franchised business, or any affiliate or guarantor is adjudicated bankrupt or insolvent, the franchise agreement will automatically terminate without notice. This also applies if a substantial portion of the assets of the franchised business are assigned to creditors.
Furthermore, the agreement will automatically terminate if a bankruptcy petition is filed by or against the franchisee, the franchised business, or any affiliate or guarantor, and it is not immediately contested and dismissed within 60 days from filing. This means that Engel & Volkers franchisees need to be diligent in managing their finances and addressing any potential bankruptcy issues promptly to avoid automatic termination of their franchise agreement.
This automatic termination clause is a significant risk for prospective Engel & Volkers franchisees. Unlike some franchise systems that may offer an opportunity to cure a financial default, Engel & Volkers reserves the right to immediate termination in the event of bankruptcy or insolvency. Franchisees should carefully consider this provision and ensure they have adequate financial resources and risk management strategies in place to prevent such a situation.