Is my franchisor violating the law if they call my land lord while im still in chapter 7 filing?

Asked about 1 year ago - La Quinta, CA

we own a fast food franchise, we filed for chapter 7, mean while we were working out a deal with our land lord on the lease for our building, he was asking for $5500 a month NNN, had a meeting with him yesterday, found out that our franchisor called him to inform him that we are in BK, and they offered him $6500 to take over the store, so now the land lord wants to change his offer to $6500 a month, or he would give the lease to the company.
I have an email from land lord with the first offer and an Emaill from us accepting it, where do we stand, and what is the franchisor's liability to us.

Attorney answers (3)

  1. Scott Benjamin Riddle

    Pro

    Contributor Level 20

    3

    Lawyers agree

    Answered . Your post leaves out important details and does not make complete sense. If the business is in Chapter 7, presumably it is either closed or the case is being administered by a Chapter 7 Trustee. It would be unusual for you to continue operating the business and negotiating leases (unless it was for a different entity). Moreover, if anyone had a claim, it would be the Trustee. Chances are not too great a liquidating company in Chapter 7 has a claim for the interference, and even less that it would belong to anyone other than the Trustee. There is likely no damage to the company in the 7.

  2. Matthew Scott Berkus

    Contributor Level 20

    2

    Lawyers agree

    Answered . Concur with Scott, too many if, ands, and buts, in that scenario to provide any meaningful insight here.

    Most franchise agreements contain a bankruptcy reversion clause; meaning, if the owners file BK, the franchisor has the right to re-claim the business. Also, as Scott points out, in a legal sense, the Trustee owns the business now, not you, so it is unclear how you have been damaged even assuming the franchisor is in violation of some law (which it probably isn't).

  3. David Eli Larson

    Pro

    Contributor Level 15

    2

    Lawyers agree

    Answered . Maybe you could tell your landlord that you will manage the store for him if he pays you $6000.00 per month, and you split any net profit above $6000.00 per month with you getting 75% of the excess net profit and he getting 25% of the excess, or some such offer. This assumes the ch 7 trustee has no interest in trying to liquidate the business.

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