Is the Spray Net Franchise Agreement provision for termination upon bankruptcy of the franchisee always enforceable?

According to Spray Net's 2025 Franchise Disclosure Document, the enforceability of the franchise agreement's termination provision upon the franchisee's bankruptcy is not absolute. Specifically, the Maryland Addendum to the Franchise Disclosure Document states that while the Franchise Agreement allows for termination upon the bankruptcy of the franchisee, this provision may not be enforceable under federal bankruptcy law.

This statement implies that federal bankruptcy laws may override the standard termination clause found in the Spray Net Franchise Agreement. Federal law is designed to provide certain protections to debtors, including franchisees, who file for bankruptcy. These protections can sometimes prevent a franchisor from terminating a franchise agreement solely based on the franchisee's bankruptcy filing.

For a prospective Spray Net franchisee, especially in Maryland, this means that the franchisor's right to terminate the agreement due to bankruptcy may be limited. It is crucial for potential franchisees to understand the interplay between the franchise agreement and federal bankruptcy law, and to seek legal counsel to fully understand their rights and obligations in the event of financial distress leading to bankruptcy. This addendum serves as an important disclosure, alerting franchisees to a potential limitation on the franchisor's termination rights, offering some level of protection in times of financial difficulty.