Under the Floors To Go franchise agreement, what happens upon bankruptcy?

According to the 2025 Floors To Go Franchise Disclosure Document, the franchise agreement contains a provision that allows for termination upon the franchisee's bankruptcy. However, the FDD also states that this provision may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C. Section 101, et seq. This means that while Floors To Go includes a clause that could lead to termination if a franchisee declares bankruptcy, federal law might override this clause, potentially preventing the termination of the franchise agreement.

This is a critical point for prospective franchisees to understand. Bankruptcy laws are designed to provide individuals and businesses a chance to reorganize or liquidate debts while protecting certain assets. The enforceability of a termination clause in a franchise agreement during bankruptcy proceedings often depends on the specific circumstances and the interpretation of federal law. The statement in the FDD serves as a warning that the standard termination clause might not hold up in court if a franchisee files for bankruptcy.

Therefore, a potential Floors To Go franchisee should seek legal counsel to fully understand their rights and obligations should they face bankruptcy. It would be prudent to discuss this specific clause with an attorney experienced in both franchise law and bankruptcy law to assess the potential risks and protections available under federal statutes. This due diligence can help a franchisee make informed decisions and plan for contingencies.

In summary, while the Floors To Go franchise agreement has a clause allowing for termination upon bankruptcy, its enforceability is questionable due to federal bankruptcy laws. Prospective franchisees should consult legal experts to understand the implications and protections available to them in such a scenario.