When are provisions requiring Alloy franchisees to waive exemplary, punitive, or similar damages void?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
Accordingly, provisions contained in the franchise agreement or elsewhere requiring franchisees to waive exemplary, punitive, or similar damages are void, except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel, in accordance with RCW 19.100.220(2).
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- Franchisor's Business Judgement. Provisions in the franchise agreement or related agreements stating that the franchisor may exercise its discretion on the basis of its reasonable business judgment may be limited or superseded by RCW 19.100.180(1), which requires the parties to deal with each other in good faith.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, provisions in the franchise agreement that require franchisees to waive exemplary, punitive, or similar damages are generally void. However, there is an exception to this rule. Such waivers are permissible and enforceable if they are part of a negotiated settlement reached after the franchise agreement is already in effect. Additionally, for the waiver to be valid, both Alloy and the franchisee must be represented by independent legal counsel during the negotiation of the settlement. This ensures that the franchisee's rights are protected and that the settlement is fair and equitable.
This provision is based on Washington state law, specifically RCW 19.100.220(2), which aims to protect franchisees from being forced into unfair agreements. The requirement for independent counsel is particularly important, as it ensures that franchisees have access to professional legal advice and are not pressured into waiving their rights without fully understanding the implications. This is a significant protection for franchisees, as it allows them to pursue treble damages under certain circumstances, as permitted by RCW 19.100.190, if they have been wronged by Alloy.
For prospective Alloy franchisees, this means that while the initial franchise agreement cannot force them to waive their right to seek exemplary or punitive damages, they could potentially agree to such a waiver later if a dispute arises and they enter into a negotiated settlement with Alloy. It is crucial for franchisees to seek independent legal counsel before agreeing to any such waiver to ensure that their interests are adequately represented and that they are making an informed decision. This clause provides an added layer of security, ensuring franchisees are not strong-armed into disadvantageous positions from the outset, while still allowing for flexibility in resolving disputes through negotiated settlements later on.
In the state of California, the FDD states that the franchise agreement contains a waiver of punitive damages and jury trial provision. These provisions may not be enforceable under California law. This is something to consider if you are planning to open an Alloy franchise in California.