What happens if an Itan franchisee is insolvent?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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, if Itan declares bankruptcy or becomes insolvent, Gold Mark, the entity that licenses the trademarks to Itan, is permitted to terminate the Intellectual Property License Agreement. However, the sublicense granted by Itan to its franchisees will remain in effect until the franchise agreement expires or is terminated. This means that even if Itan faces financial difficulties and the License Agreement is terminated, franchisees can continue using the Itan trademarks under the terms of their existing franchise agreements.
This provision offers a degree of protection to Itan franchisees, ensuring they can continue operating their salons even if the relationship between Itan and Gold Mark is severed due to Itan's insolvency. It is important for prospective franchisees to understand that while their right to use the trademarks is protected, the overall financial health of the franchisor could still impact the support and resources available to them.
It is also important to note that the continuation of the sublicense depends on the terms of the franchise agreement. Franchisees should carefully review their franchise agreement to understand the specific conditions under which their right to use the trademarks could be affected. Prospective franchisees should seek legal counsel to fully understand the implications of Itan's potential insolvency and how it could impact their investment.