Does an Alloy franchisee have the right to terminate the Area Development Agreement, and if so, under what grounds?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
rovision 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.
ADDENDUM TO THE FRANCHISE AGREEMENT REQUIRED FOR CALIFORNIA FRANCHISEES
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.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 51–56)
What This Means (2025 FDD)
According to the 2025 Alloy Franchise Disclosure Document, the franchisee's right to terminate the Area Development Agreement is governed by state laws, specifically in California and Minnesota. For California, the California Franchise Relations Act (Sections 20000 through 20043 of the California Business and Professions Code) provides franchisees with rights concerning termination, transfer, or non-renewal of a franchise. The FDD states that if any provision in the area development agreement is inconsistent with California law, the law will take precedence.
For Minnesota, Minnesota Statutes Section 80C.14, Subdivisions 3, 4, and 5, require that a franchisee be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice for non-renewal of the Area Development Agreement, except in certain specified cases. The Area Development Agreement cannot reduce any of the developer's rights as provided for in Minnesota Statutes, Chapter 80C, or their rights to any procedure, forum, or remedies provided by the laws of the jurisdiction.
For Illinois, the franchisee's rights upon termination and non-renewal are set forth in sections 19 and 20 of the Illinois Franchise Disclosure Act. These state-specific addenda ensure that Alloy franchisees receive the protections mandated by local laws, which may provide grounds for termination or non-renewal under certain conditions. A prospective franchisee should carefully review the specific statutes mentioned for their state and consult with a legal professional to fully understand their termination rights and obligations.