In Re Taylor Investment Partners Ii, LLC

533 B.R. 837 (2015)

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Nature of the Case

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Facts

Ps operate Moe's Southwestern Grill franchises. Pursuant to the franchise agreements, D is entitled to terminate the franchise agreements if certain defaults occur, including if Ps repeatedly fail to meet certain franchise standards. To that end, D performs unannounced Restaurant Operation and Standards Evaluations (ROSE). Failing two consecutive ROSE inspections places Ps in default with a 30-day opportunity to cure. If Ps fail three ROSE inspections in a 12-month period, D may terminate the franchise agreement without a cure period. D alleges Ps failed consecutive ROSE inspections in June and December of 2012. D placed Ps in default and conducted follow-up inspections in February of 2013, in which Ps again failed. After several termination deferrals, Ps and D arbitrated their dispute. The arbitrator recommended an additional inspection. P asserts Ps failed the final inspection. D sent a termination notice regarding the Decatur franchise agreement, giving Ps six months to sell or vacate. Ps filed their Chapter 11 petitions on January 22, 2015, shortly before the termination deadline. D argues, pursuant to 11 U.S.C. § 365(c), Ps may not assume the franchise agreements without D's consent, which it withholds.