What happens if the 'STATE OF' section is not properly filled out in the Alloy franchise agreement?
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. 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.
- In all other respects, the Franchise Agreement will be construed and enforced according to its terms.
FRANCHISOR: Alloy Personal Training, LLC FRANCHISEE:
ADDENDUM TO THE AREA DEVELOPMENT AGREEMENT REQUIRED FOR THE STATE OF CALIFORNIA
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 Area Development 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 area development agreement contains a provision that is inconsistent with the law, the law will control.
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- In all other respects, the Area Development Agreement will be construed and enforced according to its terms.
FRANCHISOR: Alloy Personal Training, LLC DEVELOPER:
ILLINOIS ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT
The following applies to franchises and franchisees subject to Illinois statutes and regulations:
Item 5: Due to the financial condition of the Franchisor, the Illinois Attorney General's Office has required a financial assurance. Therefore, we have posted a surety bond which is on file with the Illinois Attorney General's Office. A copy of the surety bond is attached as an exhibit to the Illinois addenda pages.
Illinois law governs the Franchise Agreement.
In conformance with Section 4 of the Illinois Franchise Disclosure Act, 815 ILCS 705/1-44 (West 2016), any provision in a franchise agreement that designates jurisdiction or venue outside the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
Based on the 2025 Alloy Franchise Disclosure Document, several states require addenda to the franchise agreement to comply with their specific regulations. For instance, California, Illinois, Minnesota, and Virginia each have addenda that address specific statutory requirements. These addenda modify certain sections of the standard franchise agreement to align with state laws. For example, the Virginia addendum stipulates that the initial franchise fee can be deferred until Alloy completes its pre-opening obligations. The Illinois addendum ensures that any clause designating jurisdiction or venue outside of Illinois is void, although arbitration outside the state is permitted. Similarly, Minnesota law provides franchisees with specific termination and nonrenewal rights, requiring 90 days' notice of termination and 180 days' notice for nonrenewal, except in certain cases. These addenda also address financial assurances required by state commerce departments or attorney generals due to Alloy's financial condition, often involving surety bonds.
If the 'STATE OF' section is not properly filled out, the implications depend on the specific state and the nature of the non-compliance. In states like California, Illinois, Minnesota, and Virginia, the addenda are designed to ensure that the franchise agreement complies with local laws. If the correct addendum is not included or is improperly completed, certain provisions of the standard agreement could be unenforceable, or the entire agreement could be called into question. For example, if a franchisee in Illinois is presented with an agreement that designates jurisdiction outside of Illinois, that provision is void under Illinois law, regardless of whether the Illinois addendum is correctly filled out. However, having the correct addendum ensures that both Alloy and the franchisee are aware of and compliant with these state-specific requirements.
For a prospective Alloy franchisee, it is crucial to ensure that the franchise agreement includes all applicable state-specific addenda and that these addenda are correctly filled out. Failure to do so could lead to legal complications, unenforceable contract terms, or even violations of state franchise laws. It is advisable to consult with a franchise attorney to review the franchise agreement and all addenda to confirm compliance with the laws of the franchisee's state. This review can help ensure that the franchisee's rights are protected and that the franchise relationship is built on a solid legal foundation. Additionally, understanding the specific modifications and protections afforded by each state's addendum is essential for making informed business decisions and managing the franchise effectively.