If an Exit Franchisee's bankruptcy proceedings prevent 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 is prevented due to the franchisee's bankruptcy proceedings, Exit's Subfranchisor may still terminate the agreement unless the franchisee takes specific actions. To avoid termination in such a situation, the franchisee must immediately and fully compensate the Subfranchisor for any breaches that led to the attempted termination.
In addition to compensating for any breaches, the franchisee must provide the Subfranchisor with adequate assurance of future performance under the franchise agreement. This assurance demonstrates to the Subfranchisor that the franchisee is committed to fulfilling their obligations and maintaining the standards of the Exit franchise.
This clause protects the Subfranchisor's interests by ensuring they are not locked into an agreement with a franchisee who is unable or unwilling to meet their contractual obligations, even if bankruptcy laws temporarily prevent termination. It also places the onus on the franchisee to take proactive steps to rectify the situation and provide confidence in their ability to continue operating the Exit franchise successfully.