Under what condition might the Franchise Agreement's provision for termination upon bankruptcy not be enforceable for a Kidokinetics franchise in California?

According to Kidokinetics's 2024 Franchise Disclosure Document, a provision in the Franchise Agreement that allows for termination upon bankruptcy may not be enforceable under federal bankruptcy law. Specifically, the FDD mentions that federal bankruptcy law, under 11 U.S.C.A. SEC. 101 et seq., could supersede this termination clause.

This means that if a Kidokinetics franchisee in California files for bankruptcy, the franchisor's right to terminate the agreement solely based on the bankruptcy filing may be challenged in court. Federal bankruptcy laws are designed to protect debtors and may prevent creditors, including franchisors, from automatically terminating contracts upon the debtor's bankruptcy. The franchisee's ability to continue operating the Kidokinetics franchise during and after bankruptcy proceedings would then be determined by the bankruptcy court.

Prospective franchisees should consult with legal counsel to fully understand their rights and obligations under both the Franchise Agreement and federal bankruptcy law, especially concerning termination clauses and their enforceability. This is particularly important given the interplay between state franchise laws, the Franchise Agreement's stipulations, and federal regulations.