What happens if a provision in the Aerus franchise agreement conflicts with California law?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, California law will take precedence over any conflicting provision in the franchise agreement. Specifically, the FDD states that California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. Therefore, if any part of the Aerus franchise agreement is inconsistent with these sections of the California law, the California law will govern the relationship.
This is particularly relevant because the Aerus franchise agreement stipulates that Texas law governs the agreement. However, this stipulation may not be enforceable under California law. The FDD also notes several specific provisions in the standard Aerus franchise agreement that may conflict with California law, including those related to termination upon bankruptcy, covenants not to compete extending beyond the termination of the franchise, liquidated damages clauses, and required binding arbitration in Dallas, Texas.
For a prospective Aerus franchisee in California, this addendum provides important legal protection. It ensures that certain rights granted by California law cannot be overridden by the standard terms of the franchise agreement. Franchisees are encouraged to seek independent legal counsel to fully understand the implications of California and federal laws, especially concerning provisions that might restrict venue to a forum outside of California.