Does Engel & Volkers have to provide notice to the franchisee before terminating the agreement due to bankruptcy?
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, Engel & Volkers can terminate the franchise agreement immediately without notice if the franchisee is adjudicated bankrupt or insolvent. This also applies if a substantial portion of the assets of the franchised business are assigned to creditors, or if a bankruptcy petition is filed by or against the franchisee and not dismissed within 60 days. This clause extends to the franchisee's business, any affiliates, or guarantors associated with the franchise.
This lack of a cure period in the event of bankruptcy is a significant point for prospective franchisees. Unlike some other defaults where Engel & Volkers provides an opportunity to rectify the situation, bankruptcy triggers immediate termination. This reflects the severe financial risk that bankruptcy poses to the Engel & Volkers system and brand.
For a potential Engel & Volkers franchisee, this underscores the importance of maintaining strong financial health and having contingency plans in place to avoid insolvency. It also highlights the need to fully understand the risks associated with the business and the potential consequences of financial distress. Franchisees should seek legal and financial advice to fully grasp the implications of this clause and to develop strategies for mitigating the risk of bankruptcy.