Our Dallas and New York franchise bankruptcy attorneys have complied a brief list of issues to consider when a franchisee bankruptcy is imminent.
There are three basic types of franchises:
A franchise relationship may be evidenced by a single contract or a series of related agreements. These contractual relationships can include the following:
Accordingly, when faced with a bankruptcy of a franchisor or a franchisee, counsel for the parties must determine whether these various contracts will be regarded as a unitary contract or separate obligations.
Generally, if a valid termination notice, which is effective upon receipt, has been delivered before the filing of bankruptcy, then the franchise agreement is not property of the estate. A franchise agreement that has expired by its own terms or that is properly terminated under state or federal law before a bankruptcy filed is not protected, because it is not considered in force. Since the franchise agreement is no longer in existence, it will not be considered property of the estate when the bankruptcy case is filed.
However, the franchise agreement is assumable if the franchisee still has the contractual opportunity to cure before the termination is contractually complete.
Other issues in franchise bankruptcies include:
Warning signs that might mean that a Chapter 11 filing is imminent include:
Dallas: Richard G. Grant, Practice Chair | Direct: 214-210-2929
New York: Robert W. Dremluk | Direct: 516-883-2759