What happens if a Floyds 99 Franchisee makes an assignment for the benefit of creditors?
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.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, if a franchisee makes an assignment for the benefit of creditors, Floyds 99 has the right to terminate the franchise agreement. This termination is effective immediately upon written notice to the franchisee. The franchisee will not be provided with an opportunity to correct the situation, although state laws to the contrary will prevail.
This clause means that if a Floyds 99 franchisee becomes unable to pay their debts and transfers their assets to a third party to manage and distribute to creditors, Floyds 99 can terminate the franchise agreement without giving the franchisee a chance to resolve the financial issues. This is a significant risk for franchisees, as it means that financial distress can lead to the loss of their franchise.
It is important to note that the FDD also states that this provision may not be enforceable under federal bankruptcy law. This means that if the franchisee files for bankruptcy, the bankruptcy court may prevent Floyds 99 from terminating the franchise agreement. Prospective franchisees should consult with a legal professional to fully understand their rights and obligations under the franchise agreement and federal bankruptcy law.