If an Engel & Volkers franchisee consents to the appointment of a receiver, what happens to the franchise agreement?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency, reorganization, receivership or other similar law now or hereafter in effect, or consent to the entry for an order for relief in an involuntary proceeding or to the conversion of an involuntary proceeding to a voluntary proceeding, under any such law; a bill in equity or other proceeding for the appointment of a receiver or other custodian of Franchisee, the franchised Business, or any affiliate or Guarantor of the franchised Business, or the assets of any of them, is filed and consented to by Franchisee; a receiver or other custodian (permanent or temporary) of all or part of the assets or property of Franchisee, the franchised Business and any affiliate or Guarantor of the franchised Business is appointed by any court of competent jurisdiction; proceedings for a composition with creditors under any federal or state law are instituted by or against Franchisee, the franchised Business or any affiliate or Guarantor thereof; Franchisee, any affiliate of Franchisee or any Guarantor are dissolved; execution is levied against Franchisee, the franchised Business, any affiliate or Guarantor thereof and/or the property of any of the foregoing; the property of the franchised Business is sold after levy thereon by any governmental body or agency, sheriff, marshal or other person authorized under federal, state and/or local law; or, if Franchisee is a business entity, its governing body adopts any resolution or otherwise authorizes action to approve any of the foregoing activities.
- 20.3 Termination by Franchisor Without Opportunity to Cure: Franchisee shall be deemed to be in default under this Agreement, and Franchisor may, at its option, terminate this Agreement and all rights granted herein effective immediately or reduce or eliminate the Protected Area by written notice to Franchisee, without giving Franchisee an opportunity to cure the default, if Franchisee either:
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, if a franchisee consents to the appointment of a receiver, it constitutes a default under the franchise agreement. Specifically, if a bill in equity or other proceeding for the appointment of a receiver or other custodian of the franchisee, the franchised business, or any affiliate or guarantor of the franchised business, or the assets of any of them, is filed and consented to by the franchisee, it triggers this default.
Upon such a default, Engel & Volkers has the option to terminate the franchise agreement and all rights granted within it, effective immediately. Alternatively, Engel & Volkers can choose to reduce or eliminate the franchisee's protected area by providing written notice. This means that the franchisee loses the opportunity to rectify the default.
This provision is fairly standard in franchising, as it protects the franchisor's brand and system from potential mismanagement or financial instability of the franchisee. It is crucial for prospective Engel & Volkers franchisees to understand the circumstances that can lead to termination without an opportunity to cure, as it can have significant financial and operational consequences.