According to the Floyds 99 guaranty, what constitutes 'Bankruptcy Laws'?

According to the 2025 Floyds 99 Franchise Disclosure Document, the franchise agreement can be terminated if the franchisee becomes insolvent or is adjudicated bankrupt. Additionally, termination can occur if any action is taken by the franchisee, or by others against the franchisee, under any insolvency, bankruptcy, or reorganization act. The FDD notes that this provision may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C. §§ 101 et seq. Termination can also occur if the franchisee makes an assignment for the benefit of creditors or a receiver is appointed.

In practical terms, this means that if a Floyds 99 franchisee faces severe financial difficulties leading to bankruptcy or similar legal proceedings, Floyds 99 has the right to terminate the franchise agreement. This is a standard clause in franchise agreements, designed to protect the brand and the franchise system from the negative impacts of a franchisee's financial distress. The reference to federal bankruptcy law suggests that the enforceability of this clause may be subject to the protections and regulations provided by those laws.

For a prospective franchisee, this highlights the importance of maintaining sound financial management and understanding the potential consequences of financial instability. It also underscores the need to seek legal counsel to fully understand the implications of the termination clause in the context of bankruptcy laws. While Floyds 99 has the right to terminate the agreement under these circumstances, the franchisee may have certain rights and protections under federal law.