What is the purpose of the California Addendum to the Aerus Disclosure Document and Franchise Agreement?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
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 serves to inform prospective franchisees in California about specific legal protections and requirements under California law. The addendum highlights how certain provisions in the standard franchise agreement might be affected or superseded by California's Franchise Investment Law and other relevant codes. This ensures that the franchisee is aware of their rights concerning aspects like termination, transfer, or non-renewal of the franchise, and that California law will take precedence if any part of the franchise agreement is inconsistent with it.
Specifically, the California Addendum addresses several clauses commonly found in franchise agreements. It points out that a termination provision based on bankruptcy might not be enforceable under federal bankruptcy law. It also notes that non-compete covenants extending beyond the franchise term, liquidated damages clauses, and mandatory binding arbitration in Texas may not be enforceable under California law. These clarifications are crucial for a California franchisee to understand the extent to which these standard clauses apply in their state.
Furthermore, the addendum encourages prospective Aerus franchisees to seek independent legal counsel to fully understand the implications of California and federal laws on provisions that restrict venue to a forum outside California. It also clarifies that the franchise agreement requires the application of Texas law, but this might not be enforceable in California. Finally, it states that Aerus does not offer financing to California franchisees and mentions the maximum interest rate in California is 10% annually. This addendum aims to provide transparency and protect the rights of franchisees within the legal framework of California.