What does the California Addendum to the Aerus Disclosure Document and Franchise Agreement address?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Item 23
RECEIPTS
Two copies of a Receipt for this Disclosure Document are attached as the last two pages.
(California, Illinois, Maryland, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, Wisconsin)
CALIFORNIA ADDENDUM TO DISCLOSURE DOCUMENT AND FRANCHISE AGREEMENT
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If the franchise agreement contains a provision that is inconsistent with the law, the law will control."
The franchise agreement provides for termination upon bankruptcy. This provision may not be enforceable under Federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The franchise agreement contains a covenant not to compete which extends beyond the termination of a franchise. This provision may not be enforceable under California law.
The franchise agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The franchise agreement requires binding arbitration. The arbitration will occur at Dallas, Texas with the costs being borne by non-prevailing party. This provision may not be enforceable under California law.
Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
The franchise agreement requires application of the laws of the State of Texas. This provision may not be enforceable under California law.
The maximum interest rate in California is 10% annually. We do not offer financing to California franchises.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the California Addendum addresses several aspects of the franchise agreement in relation to California law. It emphasizes that a copy of all proposed agreements relating to the sale of the franchise must be delivered with the disclosure document, as required by the California Franchise Investment Law.
The addendum highlights that California Business and Professions Code Sections 20000 through 20043 provide specific rights to franchisees regarding termination, transfer, or non-renewal of a franchise. It clarifies that if any provision in the franchise agreement is inconsistent with California law, the law will take precedence. Several specific clauses within the standard Aerus franchise agreement may not be enforceable under California law. These include provisions related to termination upon bankruptcy, covenants not to compete extending beyond the franchise term, liquidated damages clauses, mandatory arbitration in Dallas, Texas, and the application of Texas state laws.
The addendum encourages prospective Aerus franchisees to seek legal counsel to understand how California and federal laws, such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act, may affect any provisions in the franchise agreement that restrict venue to a forum outside California. The addendum also notes that the maximum interest rate in California is 10% annually, and Aerus does not offer financing to California franchisees. Therefore, franchisees must seek funding from other sources.
In essence, the California Addendum serves to inform potential Aerus franchisees in California of their rights and protections under California law, particularly where those rights may differ from or supersede the standard terms of the franchise agreement. It mitigates potential conflicts between the franchise agreement and California law, ensuring that franchisees are aware of their legal standing within the state.