If an Itan franchisee files for bankruptcy, can Itan terminate the franchise agreement?

According to the 2025 Itan Franchise Disclosure Document, the franchise agreement can be terminated upon bankruptcy in Maryland; however, this provision may not be enforceable under federal bankruptcy law. Specifically, the FDD states that the franchise agreement and supplemental agreements provide for termination upon bankruptcy, but this may not be enforceable under 11 U.S.C. Section 101, et seq., which is federal bankruptcy law. This amendment applies specifically to franchises operating in Maryland, in recognition of the requirements of the Maryland Franchise Registration and Disclosure Law.

For a prospective Itan franchisee in Maryland, this means that while the franchise agreement may state that bankruptcy is grounds for termination, federal law might override this provision, potentially preventing Itan from terminating the agreement solely based on the franchisee's bankruptcy filing. This creates a degree of uncertainty, as the enforceability of the termination clause depends on the interpretation and application of federal bankruptcy law at the time of the filing.

It is important for potential franchisees to consult with legal counsel to understand the interplay between the franchise agreement's termination clauses and federal bankruptcy law. This is particularly crucial for those considering opening an Itan franchise in Maryland, where the FDD explicitly acknowledges the potential conflict between state franchise law and federal bankruptcy law. Franchisees should seek clarification on how these provisions would be interpreted and enforced in the event of a bankruptcy filing to fully understand their rights and obligations.