factual

What happens if an involuntary bankruptcy petition is filed against a Gold Star franchisee?

Gold_Star Franchise · 2025 FDD

Answer from 2025 FDD Document

  • 14.3 Termination without Notice.

This Agreement (except as otherwise provided in Section 26, below) and all rights granted to FRANCHISEE hereunder shall terminate without notice to FRANCHISEE if:

  • 14.3.4 An involuntary petition in bankruptcy or any other proceeding under any federal or state solvency or similar law is filed by any other person against FRANCHISEE or any of its shareholders, members or partners without its, his or her acquiescing therein and is not dismissed within sixty (60) days of filing.

Source: Item 23 — Receipts (FDD pages 53–163)

What This Means (2025 FDD)

According to Gold Star's 2025 Franchise Disclosure Document, if an involuntary petition in bankruptcy or any similar proceeding is filed against a Gold Star franchisee or its shareholders, members, or partners, the franchise agreement can be terminated without notice, provided the franchisee does not acquiesce to the filing and the petition is not dismissed within 60 days of filing.

This means that if someone files a bankruptcy petition against a Gold Star franchisee, the franchisee has a 60-day window to have the petition dismissed. If the franchisee does not consent to the petition and manages to get it dismissed within that timeframe, the franchise agreement remains in effect. However, if the petition is not dismissed within 60 days, Gold Star has the right to terminate the franchise agreement without any further notice to the franchisee.

This clause protects Gold Star from potential financial and operational instability of a franchisee facing bankruptcy. It allows Gold Star to sever ties with a franchisee whose business is in serious financial distress, which could negatively impact the brand's reputation and the overall franchise system. For a prospective franchisee, this highlights the importance of maintaining financial stability and addressing any financial difficulties promptly to avoid the risk of losing the franchise.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.
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