What federal law might affect Pearce Bespoke's right to terminate a franchise upon bankruptcy?

According to the 2025 Pearce Bespoke Franchise Disclosure Document, federal bankruptcy law may affect Pearce Bespoke's right to terminate a franchise agreement upon the franchisee's bankruptcy. Specifically, the addendum to the Franchise Agreement notes that the franchisor's right to terminate the agreement due to the franchisee's bankruptcy may not be enforceable under federal bankruptcy law, which is codified as 11 U.S.C. §101 et. seq. This caveat is included to ensure compliance with the Maryland Franchise Registration and Disclosure Law.

This means that even if the franchise agreement contains provisions allowing Pearce Bespoke to terminate the agreement if the franchisee declares bankruptcy, those provisions might not be enforceable in practice due to federal law. Federal bankruptcy law is designed to provide certain protections to debtors, which can sometimes override contractual agreements.

For a prospective Pearce Bespoke franchisee, this is an important consideration. If the franchisee faces financial difficulties and files for bankruptcy, Pearce Bespoke might not be able to terminate the franchise agreement as easily as the contract suggests. The franchisee should consult with a legal professional to fully understand their rights and obligations in the event of bankruptcy, and how federal law interacts with the franchise agreement.