What happens if a bankruptcy petition is filed by or against an Even Hotels franchisee?

According to the 2025 FDD, the Even Hotels franchise agreement contains provisions related to bankruptcy, but their enforceability is subject to the U.S. Bankruptcy Code and court rulings. Specifically, for franchisees in California, Maryland, North Dakota, Hawaii, and Rhode Island, paragraphs 11.C(1)(b) and (d) of the license agreement are amended to include language clarifying that the U.S. Bankruptcy Code governs the enforceability of these provisions. This means that if an Even Hotels franchisee files for bankruptcy, or if an involuntary petition is filed against them, the standard terms of the franchise agreement regarding termination or other penalties may not automatically apply. A court will need to determine whether those terms are enforceable under bankruptcy law. This introduces an element of uncertainty for both the franchisee and the franchisor.

For a prospective Even Hotels franchisee, this means that the consequences of bankruptcy are not solely determined by the franchise agreement. The U.S. Bankruptcy Code provides certain protections to debtors, and a bankruptcy court has the power to modify or reject certain contractual obligations. This could potentially allow a franchisee to continue operating the Even Hotels location even if they are in financial distress, or to negotiate more favorable terms with the franchisor. However, it also means that the franchisor's ability to terminate the agreement and take control of the location may be limited.

It's important to note that these amendments primarily address the enforceability of existing provisions within the franchise agreement, rather than creating new obligations or rights. The specific circumstances of the bankruptcy case, the franchisee's financial situation, and the applicable provisions of the U.S. Bankruptcy Code will all play a role in determining the outcome. Prospective franchisees should consult with legal counsel to fully understand their rights and obligations in the event of bankruptcy. They should also inquire with Even Hotels about any specific policies or procedures related to franchisees in financial distress.