If Exit Franchisee's bankruptcy precludes termination, what must the Franchisee do to avoid termination?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (iv) If termination of this Agreement due to Franchisee's breach thereof or due to the commencement with respect to one or more of Franchisee's bankruptcy or similar proceedings, or expiration of this Agreement is precluded by operation of the bankruptcy laws, then Subfranchisor may terminate this Agreement unless Franchisee immediately and fully compensates Subfranchisor for any such breach or provides Subfranchisor with adequate assurance of future performance of this agreement.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the termination of the franchise agreement due to the franchisee's breach or the commencement of bankruptcy proceedings is prevented by bankruptcy laws, Exit may still terminate the agreement. To avoid termination in such a situation, the franchisee must immediately and fully compensate Exit for any breach that occurred.
In addition to compensating for the breach, the franchisee must provide Exit with adequate assurance of future performance under the franchise agreement. This means the franchisee needs to demonstrate a solid plan and the means to fulfill all obligations outlined in the agreement going forward.
This provision highlights the importance of maintaining financial stability and adhering to the terms of the franchise agreement. Bankruptcy or breach of contract can lead to termination unless the franchisee takes immediate and comprehensive action to rectify the situation and reassure Exit of their commitment to future compliance.