Is a termination provision in the My Salon Suite Franchise Agreement based on franchisee bankruptcy enforceable under federal bankruptcy law?

According to the 2025 My Salon Suite Franchise Disclosure Document, the Franchise Agreement includes a provision for termination upon franchisee bankruptcy. However, the FDD explicitly states that this provision may not be enforceable under Federal Bankruptcy Law (11 U.S.C.A Sec. 101 et seq.).

This means that while the My Salon Suite Franchise Agreement allows the franchisor to terminate the agreement if a franchisee declares bankruptcy, this clause's enforceability is questionable under federal law. Federal bankruptcy law is designed to protect debtors, and certain clauses that automatically terminate contracts upon bankruptcy may be overridden by the bankruptcy court.

For a prospective My Salon Suite franchisee, this implies that the franchisor's ability to terminate the agreement solely based on a bankruptcy filing may be limited. A bankruptcy court could potentially prevent My Salon Suite from terminating the franchise agreement, allowing the franchisee to continue operating the business while under bankruptcy protection. It is important for potential franchisees to consult with a legal professional to fully understand their rights and obligations in the event of bankruptcy.

It is also important to note that the automatic termination clause is triggered if the franchisee makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated bankrupt or insolvent, files or acquiesces in the filing of a petition seeking reorganization, or consents to the appointment of a trustee or receiver. The agreement also states that involuntary bankruptcy proceedings that are not dismissed within 60 days can trigger automatic termination.