Under the Mrcool Franchise Agreement, is termination provided for upon bankruptcy, and is this provision enforceable under federal bankruptcy law?

According to Mrcool's 2025 Franchise Disclosure Document, the Franchise Agreement does provide for termination upon bankruptcy. Specifically, the Maryland FDD Amendment indicates that the Franchise Agreement includes a provision allowing for termination if the franchisee declares bankruptcy. However, the amendment also states that this provision may not be enforceable under federal bankruptcy law. This is because federal law often protects debtors from certain contract terminations that would prevent them from reorganizing their finances.

This means that while Mrcool includes a bankruptcy termination clause in its standard agreement, the enforceability of that clause is questionable. A franchisee's bankruptcy case could potentially override Mrcool's right to terminate the agreement. This is a fairly common situation in franchising, as franchisors seek to protect their brand and system, while bankruptcy laws aim to give debtors a fresh start.

Prospective Mrcool franchisees should be aware of this potential conflict and consult with a legal professional to understand their rights and obligations in the event of bankruptcy. It would be prudent to discuss with Mrcool how they have handled similar situations in the past and what their specific policies are regarding franchisees who file for bankruptcy. Understanding the interplay between the Franchise Agreement and federal bankruptcy law is crucial for any franchisee.