Under what conditions regarding insolvency or bankruptcy will a Jersey Mikes developer be deemed in default and have their rights automatically terminated without notice?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
7.2 Developer shall be deemed in default under this Agreement, and all rights granted by this Agreement to Developer shall automatically terminate without notice: (i) If Developer shall be adjudicated bankrupt, becomes insolvent, commits any affirmative action of insolvency or files any action or petition of insolvency, or if a receiver (permanent or temporary) of its property or any part of Developer is appointed by a court of competent authority, or if it makes a general assignment for the benefit of its creditors; (ii) if a final judgment remains unsatisfied of record for thirty (30) days or longer (unless a supersedeas bond is filed); (iii) if execution is levied against Developer's business or property, or; (iv) if suit to foreclose any lien or mortgage against Developer's premises or equipment is instituted against Developer and not dismissed within thirty (30) days, or is not in the process of being dismissed; provided, however, that Franchisor reserves the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by Developer.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mikes's 2025 Franchise Disclosure Document, a developer's rights can be automatically terminated without notice under specific insolvency or bankruptcy-related conditions.
Specifically, Jersey Mikes will consider a developer in default if the developer: is adjudicated bankrupt, becomes insolvent, commits any affirmative action of insolvency, or files any action or petition of insolvency. Default also occurs if a receiver (permanent or temporary) of the developer's property is appointed by a court, or if the developer makes a general assignment for the benefit of its creditors.
This clause means that if a Jersey Mikes developer encounters severe financial difficulties leading to bankruptcy or insolvency, Jersey Mikes has the right to immediately terminate the development agreement without needing to provide any prior warning or opportunity to rectify the situation. However, Jersey Mike's reserves the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by the developer. This is a fairly standard protective measure in franchising, allowing the franchisor to safeguard its brand and system from potential damage due to a developer's financial instability.
Prospective Jersey Mikes developers should carefully consider the financial risks associated with the development agreement and ensure they have sufficient capital and a robust business plan to avoid such circumstances. Understanding these default conditions is crucial for any potential franchisee to assess their own risk tolerance and financial stability before entering into an agreement.