What happens if a Floyds 99 Franchisee becomes insolvent, leading to potential termination?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
e provisions of Sections 18.4 and 20.3, the form of which is attached as Exhibit VI to this Agreement. Such consent will subject any interest they may have in this Agreement, in the Shop, or in the Franchisee covered by the option or right of first refusal provided for in said Sections, as applicable (whether a separate property interest, joint ownership property interest, community property interest, or otherwise), to the provisions of those Sections.
20. DEFAULT AND TERMINATION
20.1 Termination by Franchisor Effective Upon Notice. The Franchisor shall have the right, at its option, to terminate this Agreement and all rights granted the Franchisee hereunder, without affording the Franchisee any opportunity to cure any default (subject to any state laws to the contrary, where state law shall prevail), effective upon written notice to the Franchisee, addressed as provided in Section 24.12 upon the occurrence of any of the following events:
- a. Abandonment. If the Franchisee ceases to operate the FLOYD'S 99 Shop or otherwise abandons the FLOYD'S 99 Shop for a period of three consecutive days, or any shorter period that indicates an intent by the Franchisee to discontinue operation of the FLOYD'S 99 Shop, unless and only to the extent that full operation of the FLOYD'S 99 Shop is suspended or terminated due to fire, flood, earthquake or other similar causes beyond the Franchisee's control and not related to the availability of funds to the Franchisee;
- b. Insolvency; Assignments. If the Franchisee becomes insolvent or is adjudicated a bankrupt; or if any action is taken by the Franchisee, or by others against the Franchisee under any insolvency, bankruptcy or reorganization act, (this provision may not be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq.); or if the Franchisee makes an assignment for the benefit of creditors or a receiver is appointed by the Franchisee;
c. Unsatisfied Judgments; Levy; Foreclosure. If any material judgment (or several judgments which in the aggregate are material) is obtained against the Franchisee and remains unsatisfied or of record for 30 days or longer (unless a supersedeas or other appeal bond has been filed); or if execution is levied against the Franchisee's business or any of the property used in the operation of the FLOYD'S 99 Shop and is not discharged within five days; or if the real or personal property of the Franchisee's business shall be sold after levy thereupon by any sheriff, marshal or constable;
d. Criminal Conviction. If the Franchisee is convicted of a felony, a crime involving moral turpitude, or any crime or offense that is reasonably likely, in the sole opinion of the Franchisor, to materially and unfavorably affect the Licensed Methods, Marks, goodwill or reputation thereof;
e. Failure to Make Payments. If the Franchisee fails to pay any Royalties, National Marketing Contributions, inventory payments, product payments or any other amounts due the Franchisor or its affiliates, including any amounts which may be due as a result of any subleases or lease assignments between the Franchisee and the Franchisor, within 10 days after receiving notice that such fees or amounts are overdue;
f. Misuse of Marks.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, if a franchisee becomes insolvent, it can lead to the termination of the franchise agreement. Floyds 99 has the right to terminate the agreement immediately upon written notice if the franchisee becomes insolvent or is adjudicated bankrupt. This also applies if any action is taken by the franchisee or others against the franchisee under any insolvency, bankruptcy, or reorganization act, or if the franchisee makes an assignment for the benefit of creditors or a receiver is appointed.
This provision means that a franchisee's financial instability can have severe consequences, potentially leading to the loss of their franchise. However, the FDD notes that the enforceability of this provision may be limited by federal bankruptcy law. It is important for prospective franchisees to understand the financial risks involved in operating a Floyds 99 franchise and to have a solid financial plan in place to avoid insolvency.
Upon termination of the agreement, Floyds 99 has the option to purchase the shop or its assets at fair market value, less any amount apportioned to the goodwill of the shop attributable to Floyds 99's marks and licensed methods, and less any amounts owed to Floyds 99 by the franchisee. Floyds 99 must provide written notice of its intention to exercise this option no later than the effective date of termination. If the parties cannot agree on the fair market value, it will be determined by an independent third-party appraisal, with each party selecting an appraiser and the two appraisers selecting a third. The purchase price will be the median of the values determined by the three appraisers, and the parties will split the expenses of the third appraiser. If Floyds 99 does not exercise its right to purchase the shop, the franchisee is free to sell the physical assets to a third party, provided that all appearances of Floyds 99's marks and trade dress are removed.