The United Kingdom

1    Can I terminate a franchisee for entering into insolvency proceedings (in the event that the agreement does not contain an ipso facto clause or, if it did, such clause would not be valid), or pre-emptively terminate them if I know an insolvency practitioner is about to be appointed?

No, unless for a different reason, eg, non-payment. Ipso facto clauses under English law are ineffective if termination is for reason of an insolvency process.

2    Am I obliged to continue to supply a franchisee that is in insolvency proceedings? How does this process affect my contractual rights?

You are not obliged to continue with supplies without obtaining confirmation/an undertaking from the administrators/liquidators that the supplies will be paid for. You cannot refuse to supply on the basis of requiring outstanding payments to be made good first.

3    Can I retrieve products for which the franchisee has not yet paid? If so, how and when?

Only if there is a valid reservation of title clause. If the franchisee is in administration there is a statutory moratorium in force which would prevent the retrieval of goods without the consent of the administrators or the court.

4    Does a post contractual non-compete clause remain in force after the franchise agreement has ended by or because of insolvency proceedings?

This will depend on the terms of the contract, it is not governed by insolvency law.

5    Is the franchisee entitled to goodwill in case of termination of the agreement and if so, does this still apply in an insolvency situation?

In the UK, franchisees are not entitled by law to goodwill compensation, in the way that a commercial agent might be. Unless the contract expressly provides for this, no goodwill compensation will be payable to a franchisee on termination, irrespective of whether or not they are subject to an insolvency process.

6    A franchisee is in financial difficulties and is going to sell its business (as an asset sale) to a new franchisee. Do I have any legal duty to the purchasing franchisee?

No, a franchisor should not interfere with a buyer/seller process, provided that the franchisor is in favour of a sale. A franchisor has no contractual link to a purchaser prior to a sale, and duties of confidentiality towards the selling franchisee. However, a franchisor should encourage the purchaser to carry out appropriate due diligence (which should reveal any trading difficulties) and ideally the existing franchise agreement will have a mechanism in it which will allow the franchisor to challenge the purchase and refer it to third party valuation (if it thinks it is too high).

7    A third party wishes to buy the franchisee's business from the insolvency practitioner - to what extent do my contractual rights to approve the sale, if any, clash with the insolvency practitioner's duty to realise value for franchisee's creditors?

Any insolvency practitioner will sell the business subject to the franchisors rights. It is possible for a franchisor to attempt to prevent the sale on the basis of such a clause, but usually the insolvency practitioner's rights to realise assets will outweigh the franchisors rights. The franchisor may be left with a claim for damages in the insolvency. In practice any purchaser of the business is likely to seek the consent of the franchisor before completing on the sale, as otherwise this would affect value.

8    An insolvent franchisee operates at a key location – how can I ensure there is business continuity and a transfer of the lease/business, either back to the franchisor, or to a third party of its choosing?

Such provisions are not generally enforceable on an insolvency. However, as stated above, a purchaser will generally try to get the franchisor on board with any purchase before completion, so in practice the franchisor may not be too concerned.