If a receiver is appointed for a Gokhale Method franchisee's business, does the franchise agreement automatically terminate?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
15. DEFAULT AND TERMINATION
- 15.1. Automatic Termination. You shall be deemed to be in default under this Agreement, and all rights granted to you herein shall automatically terminate without notice to you or opportunity to cure, if one or more of the following occur: You become insolvent or make a general assignment for the benefit of creditors; a petition in bankruptcy is filed by you or such a petition is filed against and not opposed by you; you are adjudicated bankrupt or insolvent; a bill in equity or other proceeding for the appointment of a receiver of you or other custodian for your business or assets is filed and consented to by you; a receiver or other custodian (permanent or temporary) of your assets or property, or any part thereof, is appointed by any court of competent jurisdiction; proceedings for a composition with creditors under any state or federal law should be instituted by or against you; a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless supersedes bond is filed); you are dissolved; you die or are declared incompetent; execution is levied against your business or property; suit to foreclose any lien or mortgage against the Location or equipment is instituted against you and not dismissed within thirty (30) days; you attempt to transfer this Franchise Agreement or more than half the assets of the Franchised Business; you delegate teaching of the Gokhale System without our prior written consent; or the real or personal property of the Franchised Business shall be sold after levy thereupon by any sheriff, marshal, or constable.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 Gokhale Method Franchise Disclosure Document, the franchise agreement will automatically terminate if a receiver is appointed for the franchisee's business. Specifically, if a bill in equity or other proceeding for the appointment of a receiver of the franchisee or other custodian for the business or assets is filed and consented to by the franchisee, the agreement automatically terminates. Similarly, if a receiver or other custodian (permanent or temporary) of the franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction, the agreement also automatically terminates.
This automatic termination occurs without any prior notice to the franchisee or any opportunity to remedy the situation. This means that if a franchisee faces financial difficulties leading to the appointment of a receiver, the Gokhale Method franchise can be terminated immediately, regardless of the franchisee's efforts to resolve the issues.
This provision is relatively common in franchise agreements, as it protects the franchisor's brand and interests in cases where a franchisee's business is in severe financial distress and control is handed over to a third party. Prospective Gokhale Method franchisees should be aware of this clause and understand the potential consequences of financial instability leading to receivership.
In addition to receivership, the Gokhale Method franchise agreement will also automatically terminate if the franchisee becomes insolvent, makes an assignment for the benefit of creditors, files for bankruptcy, is adjudicated bankrupt or insolvent, has a final judgment remain unsatisfied for 30 days, is dissolved, dies or is declared incompetent, has an execution levied against their business or property, attempts to transfer the Franchise Agreement or more than half the assets of the Franchised Business, delegates teaching of the Gokhale System without prior written consent, or the real or personal property of the Franchised Business is sold after levy thereupon by any sheriff, marshal, or constable.