If an Engel & Volkers franchisee's affiliate is dissolved, what happens to the franchise agreement?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the franchise agreement can be automatically terminated without notice if any affiliate of the franchisee is dissolved. Specifically, if Franchisee, any affiliate of Franchisee or any Guarantor are dissolved, it constitutes a default under the agreement. In such a case, all rights granted in the agreement immediately and automatically terminate and revert to Engel & Volkers without notice to the franchisee.
This provision means that if a franchisee's affiliated business entity, such as a holding company or a related investment vehicle, is dissolved for any reason, Engel & Volkers has the right to immediately terminate the franchise agreement. This is a significant risk for franchisees who operate their Engel & Volkers business through a complex corporate structure, as the dissolution of any related entity, even if unintentional or for legitimate business reasons, can trigger termination.
Prospective franchisees should carefully consider the implications of this clause, especially if they plan to involve affiliates in their Engel & Volkers business. It would be prudent to consult with legal and financial advisors to understand how to structure their business in a way that minimizes the risk of inadvertent termination due to affiliate dissolution. Franchisees should also seek clarification from Engel & Volkers regarding the types of entities that would be considered 'affiliates' for the purposes of this clause.