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Restructuring Franchise Businesses in Chapter 11: Enhancing Lender and Franchisor Positions

Assumption, Rejection, and Assignment of Franchise Agreements; Protecting Cash Collateral; Rejection Damages; Intercreditor Issues

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Wednesday, December 13, 2023

Recorded event now available

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This CLE webinar will discuss assumption, rejection, and assignment of franchise agreements, licensing agreements (including IP licenses), service contracts, noncompetition agreements, and unexpired leases, as well as related issues such as adequate protection, use of cash collateral, damages caps, franchisor as landlord, and intercreditor issues in the context of a franchisee bankruptcy. The panel will offer insights, practice pointers, and strategies on these key issues in franchisee bankruptcy cases that can be applied and adapted in many other cases.

Description

Some of the estimated 805,000 franchise establishments in the U.S. (as of 2023) will inevitably wind up in Chapter 11, where bankruptcy lawyers for lenders, suppliers, franchisors, and others will need to address the fallout. Many of the most complex and most often litigated issues in all of bankruptcy are concentrated in franchisee cases: the automatic stay, assumption and assignment of executory leases and contracts, asset sales, and intellectual property.

Much of the case focuses on the debtor's potential assumption or assignment of the franchise agreement and related agreements. The debtor has a number of bankruptcy tools with which to cure defaults under the franchise agreement but those are balanced by powerful rights and defenses in favor of the franchisor. Command of Sections 362, 363, and 365 is not optional and provides insight readily applied in other cases.

Astute franchisors have numerous opportunities to improve their position with respect to the debtor franchisee as well as within their franchise system. Lenders likewise can enhance their position but have to be careful to protect their collateral. Each of the many other constituencies in the case have their own agendas and can create formidable coalitions.

Listen as this experienced and premier panel of bankruptcy restructuring lawyers and a franchise lawyer offers insight, practice points, and strategies on issues in franchisee bankruptcy cases and how they can be applied and adapted in many other cases.

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Outline

  1. Overview of franchise structures
  2. Section 362 and Section 341issuess: applicability of automatic stay
  3. Section 363 sale issues
  4. Assumption, rejection, and assignment of franchise agreements under Section 365
    1. Trademark rights
    2. Franchisor's veto power
    3. Cross default provisions in multiple agreements
    4. Curing defaults
  5. Lender issues
    1. Cash collateral and rights of franchisor
    2. Intercreditor issues

Benefits

The panel will review these and other key issues:

  • When is the franchise agreement an executory contract?
  • What type of intercreditor issues arise between franchisor and lenders?
  • May the debtor assign its franchise agreement to a third party without the franchisor's consent?
  • What is the effect of Mission Product Holdings Inc. v. Tempnology L.L.C., 139 S. Ct. 1652 (2019)?

Faculty

Desiderio , Christopher
Christopher M. Desiderio
Counsel
Nixon Peabody

Mr. Desiderio is a member of Nixon Peabody’s Bankruptcy & Financial Restructuring group, where he represents...  |  Read More

Fong, Christopher
Christopher Fong
Counsel
Nixon Peabody

Mr. Fong is counsel in the Bankruptcy & Financial Restructuring group and is located in the firm’s New York...  |  Read More

Pedone, Richard
Richard C. Pedone
Partner, Team Leader, Bankruptcy & Financial Restructuring
Nixon Peabody

Mr. Pedone is a member of Nixon Peabody’s Business & Finance Department and the leader of the Bankruptcy...  |  Read More

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