What is the purpose of including a 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
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 of specific legal rights and protections afforded to them under California law. The addendum highlights potential conflicts between the standard Aerus Franchise Agreement and California law, clarifying that California law will take precedence in such cases.
The California Addendum addresses key areas such as termination, transfer, or non-renewal of the franchise, noting that California Business and Professions Code Sections 20000 through 20043 provide specific rights to franchisees in these situations. It also points out that certain provisions in the standard Aerus franchise agreement, such as those related to termination upon bankruptcy, covenants not to compete extending beyond the franchise term, liquidated damages clauses, and mandatory arbitration in Dallas, Texas, may not be enforceable under California law.
The addendum encourages prospective Aerus franchisees to seek independent legal counsel to understand how California and federal laws apply to specific provisions within the franchise agreement, especially those that restrict venue to locations outside of California. By including this addendum, Aerus aims to ensure compliance with the California Franchise Investment Law and to provide transparency to potential franchisees regarding their rights and obligations within the state.