What California statutes and regulations does the Addendum to the Alloy Franchise Agreement address?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
This Addendum pertains to franchises sold in the State of California and is for the purpose of complying with California statutes and regulations. Notwithstanding anything which may be contained in the body of the Franchise Agreement to the contrary, the Agreement is amended as follows:
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- California Business and Professions Code Sections 20000 through 20043, the California Franchise Relations Act, 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.
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- Termination of the franchise agreement by us because of your insolvency or bankruptcy may not be enforceable under applicable federal law (11 U.S.C.A. 101 et seq.).
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- Section 10.D of the Franchise Agreement contains a covenant not to compete which extends beyond the term of the franchise. This provision may not be enforceable under California law.
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- The franchise agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
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- The franchise agreement requires binding arbitration. The arbitration will occur at Indianapolis, Indiana with the costs being borne by the non-prevailing party. You 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.
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- The franchise agreement requires application of the laws of the state of the location where the Facility is located. This provision may not be enforceable under California law.
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- Any provision of a franchise agreement, franchise disclosure document, acknowledgement, questionnaire, or other writing, including any exhibit thereto, disclaiming or denying any of the following shall be deemed contrary to public policy and shall be void and unenforceable:
- (a) Representations made by the franchisor or its personnel or agents to a prospective franchisee.
- (b) Reliance by a franchisee on any representations made by the franchisor or its personnel or agents.
- (c) Reliance by a franchisee on the franchise disclosure document, including any exhibit thereto.
- (d) Violations of any provision of this division.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the California Addendum addresses several California statutes and regulations to ensure compliance within the state. Specifically, it references the California Business and Professions Code Sections 20000 through 20043, also known as the California Franchise Relations Act, which outlines franchisee rights regarding termination, transfer, and non-renewal of the franchise agreement. The addendum clarifies that if any provision in the franchise agreement conflicts with this law, the law will take precedence.
The addendum also addresses the enforceability of certain clauses under California law. For instance, it notes that Alloy's termination of the franchise agreement due to the franchisee's insolvency or bankruptcy may not be enforceable under federal law. Additionally, the enforceability of the covenant not to compete extending beyond the franchise term, as well as liquidated damages clauses, are addressed with reference to California law.
Furthermore, the addendum highlights that any provision disclaiming or denying representations made by Alloy, reliance by a franchisee on such representations, or reliance on the Franchise Disclosure Document is considered contrary to public policy and therefore void and unenforceable. The addendum also addresses the enforceability of the application of law and venue, noting that requiring these to be outside of California may not be enforceable under California law. These stipulations collectively aim to protect the franchisee's rights and ensure compliance with California's franchise-related regulations.