One of the first questions that many franchisees will have when the franchisor goes into bankruptcy is “Can I keep running my business?” The answer to this is a resounding yes. When a franchisor declares bankruptcy they lose all the rights they have to their name and brand. This means they have no legal grounds on which to try and prevent you from using the name in your business. However, you need to make sure that you want to use the brand name for your business. People may associate your franchise with the bankruptcy and stop from visiting your business.
If you have specific questions about what happens when a franchisor declares bankruptcy, contact a Hawaii bankruptcy attorney at 1330 Ala Moana Boulevard #202, Honolulu, HI 96814 (808) 554-0104. They can give you details on what will happen with your particular franchise in the event of bankruptcy.
In a typical Hawaii bankruptcy you should immediately cease sending royalty payments to the franchisor. Once the bankruptcy was declared, the franchise agreement immediately became null and void. After the agreement is voided, there’s no reason to keep sending your hard earned money to a failed company! You may end up needing every penny to try and avoid the negative press that may come with being part of a bankrupt franchise.
You may also want to contact some owners of other franchises in the area to see how they have been affected by the bankruptcy. By partnering together (even if it is an unofficial partnership) you can help each other to weather the storm and make sure that your individual businesses are not harmed by the bankruptcy of the parent franchise. Try to avoid the negative publicity that comes with the bankruptcy of the franchisor. You need to do everything possible to make sure you are not dragged down by the parent company’s problems.
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Franchise Bankruptcy - What if the Franchisor Declares Bankruptcy