Can a disclaimer signed by an All County franchisee waive a claim of fraud in the inducement?
All_County Franchise · 2025 FDDAnswer from 2025 FDD Document
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF NEW YORK
(continued)
- Receipts--Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting, ten (10) business days before the execution of the franchise or other agreement, or the payment of any consideration that relates to the franchise relationship.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to All County's 2025 Franchise Disclosure Document, the answer depends on the state where the franchise is located. For franchisees in New York, Virginia, Illinois, Maryland and California, no statement, questionnaire, or acknowledgment signed by a franchisee can waive claims of fraud in the inducement. This means that even if an All County franchisee signs a document that appears to waive their right to sue for fraud based on misrepresentations made to induce them to invest in the franchise, that waiver will not be enforceable. This protection is explicitly stated to supersede any other conflicting terms in any document executed in connection with the franchise agreement in those states.
This protection is particularly important for prospective franchisees because it ensures that they retain their legal rights to seek recourse if they believe they were misled during the franchise sales process. Fraud in the inducement refers to a situation where a franchisee is convinced to enter into a franchise agreement based on false or misleading statements made by the franchisor. Without this protection, All County could potentially use disclaimers to shield themselves from liability, even if they engaged in fraudulent behavior.
For example, in California, the FDD explicitly states that "No disclaimer, questionnaire, clause, or statement signed by a franchisee in connection with the commencement of the franchise relationship shall be construed or interpreted as waiving any claim of fraud in the inducement, whether common law or statutory, or as a disclaiming reliance on or the right to rely upon any statement made or information provided by the franchisor, broker, or other person acting on behalf of the franchisor that was a material inducement to a franchisee's investment." This specific language reinforces the franchisee's right to rely on the information provided by All County and its representatives during the sales process.
However, it is important to note that these protections are specifically mentioned for franchisees subject to the laws of New York, Virginia, Illinois, Maryland and California. The FDD does not explicitly address whether such waivers are permissible in other states. Therefore, prospective All County franchisees should consult with an attorney to understand their rights and protections under the laws of their specific state.