Does the Pearce Bespoke Franchise Agreement include a provision for termination upon bankruptcy, and is this provision always enforceable?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee will be in default, and Franchisor may, at its option, terminate this Agreement, as provided herein, if:
(6) Franchisee is insolvent within the meaning of any applicable state or federal law;
(7) Franchisee makes an assignment for the benefit of creditors or enters into any similar arrangement for the disposition of its assets for the benefit of creditors;
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- Any requirement that you consent to (i) the jurisdiction of courts outside of North Dakota, (ii) the application of laws of a state other than North Dakota, (iii) waiver of jury trial or (iv) waiver of exemplary and punitive damages shall not apply to the extent prohibited by the NDFIL;
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- Any requirement that you consent to a limitation of clai
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the Franchise Agreement can be terminated if the franchisee is insolvent under any applicable state or federal law. This means that if a franchisee's liabilities exceed their assets and they are generally unable to pay their debts as they become due, Pearce Bespoke has the option to terminate the agreement.
Additionally, Pearce Bespoke can terminate the agreement if the franchisee makes an assignment for the benefit of creditors or enters into any similar arrangement for the disposition of its assets for the benefit of creditors. This clause protects Pearce Bespoke from franchisees attempting to restructure or liquidate their business in a way that could harm the brand or the interests of other franchisees.
However, the enforceability of these termination provisions may be subject to certain state laws. For example, in North Dakota, any requirement that the franchisee consent to limitations of claims may not apply to the extent prohibited by the North Dakota Franchise Investment Law (NDFIL). This means that while Pearce Bespoke includes these conditions in its franchise agreement, their application can vary based on local regulations, and a franchisee's rights during financial distress might be stronger in some states than others.