What happens if an Itan franchisee declares bankruptcy?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
any of the Marks; or (d) infringing uses we are aware of that could materially affect your use of the Marks.
In May of 2008 we entered into an Intellectual Property License Agreement with Gold Mark (the "License Agreement"). Under the terms of the License Agreement, Gold Mark granted us the right to use the Marks in the iTAN System and sublicense the Marks to our franchisees. The term of the License Agreement automatically renews annually, unless it is terminated in accordance with its terms. Gold Mark is permitted to terminate the License Agreement only if we: (a) declare bankruptcy or become insolvent; or (b) consent to the termination. If
the License Agreement is terminated, it states all sublicenses granted by us to our franchisees will continue in full force and effect until the expiration or termination of the applicable franchise agreement. No other agreements limit our right to use or sublicense use of the Marks.
ITEM 14 PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION
No patents or pending patent applications are material to the franchise.
Although we have not filed an application for copyright registration for our Manual, website or marketing materials, we do claim a copyright to these items.
During the term of the Franchise Agreement, we allow you to use certain confidential and proprietary information (some of which constitute "trade secrets") relating to the development, marketing and operation of a Salon. Examples include:
- architectural plans, drawings and specifications for a prototype Salon
- site selection criteria
- methods, techniques, policies, procedures, standards and specifications
- supplier lists and information
- marketing and merchandising strategies
- information comprising the System
We own all ideas, improvements, inventions, marketing materials and other concepts you develop relating to a Salon. We also own all operational and customer data relating to your Salon. You must treat this data as confidential.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 36–39)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the consequences of a franchisee's bankruptcy are addressed in several contexts. Firstly, the franchisor's intellectual property license with Gold Mark can be terminated if Itan declares bankruptcy or becomes insolvent. However, the sublicense granted to Itan franchisees will remain in effect until the franchise agreement expires or is terminated.
Secondly, Item 23 clarifies that any personal guaranty provided by an individual is not affected by the franchisee's bankruptcy. The guarantor's obligations, including payments, remain unchanged even if the franchisee or their successors declare bankruptcy. The guarantor's liability is joint and several with the franchisee, meaning the guarantor is directly and immediately liable for the franchisee's obligations. This protection extends to Itan, ensuring they can pursue remedies against the guarantor regardless of the franchisee's bankruptcy proceedings.
Finally, the FDD includes a provision specific to Maryland franchisees, stating that while the Franchise Agreement may provide for termination upon bankruptcy, this provision may not be enforceable under federal bankruptcy law. This suggests that federal bankruptcy law may override certain termination clauses in the franchise agreement, potentially allowing the franchisee to continue operating under bankruptcy protection. Prospective franchisees should consult with a legal professional to fully understand their rights and obligations in the event of bankruptcy.