Under what circumstances related to bankruptcy might the Even Hotels License Agreement's termination provision be unenforceable?

According to Even Hotels's 2025 Franchise Disclosure Document, the enforceability of the termination provisions related to bankruptcy within the License Agreement is subject to the U.S. Bankruptcy Code. Specifically, for franchisees in California, North Dakota, Hawaii, Maryland, and Rhode Island, paragraphs 11.C(1)(b) and (d) of the License Agreement are amended to reflect this. This means that whether Even Hotels can enforce the termination of the agreement due to bankruptcy is not solely determined by the franchise agreement itself. Instead, it depends on the specifics of the Bankruptcy Code and the rulings of a competent court.

This amendment acknowledges that federal bankruptcy law takes precedence over the standard terms of the Even Hotels franchise agreement. The U.S. Bankruptcy Code is designed to provide certain protections to debtors, and these protections can sometimes override contractual obligations. For example, the Bankruptcy Code may impose a stay on termination clauses, preventing Even Hotels from terminating the agreement immediately upon the franchisee filing for bankruptcy. The court will consider the specific circumstances of the bankruptcy case and make rulings based on federal law.

For a prospective Even Hotels franchisee, this means that the standard termination clauses in the franchise agreement related to bankruptcy are not absolute. If the franchisee faces financial difficulties and files for bankruptcy, the enforceability of those clauses will be determined by the bankruptcy court. This could provide the franchisee with some breathing room to reorganize their finances and potentially continue operating the franchise. However, it also introduces uncertainty, as the outcome will depend on the court's interpretation of the Bankruptcy Code and the specific facts of the case. Franchisees should consult with legal counsel to understand their rights and obligations under the Bankruptcy Code.

It is important to note that this amendment does not provide specific details on what aspects of the termination provision might be unenforceable. It simply states that enforceability is governed by the U.S. Bankruptcy Code. A prospective franchisee should consult with a legal professional to fully understand the implications of bankruptcy law on their franchise agreement. They should also seek clarification from Even Hotels regarding specific scenarios and how the company has handled similar situations in the past.