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Under what circumstances might a provision of the Azal Coffee Franchise Agreement be deemed unenforceable?

Azal_Coffee Franchise · 2024 FDD

Answer from 2024 FDD Document

franchise agreement.

  • (d) Any provision of the Agreement specifying a state other than Illinois as the forum for litigation is void with respect to any cause of action that is otherwise enforceable in the State of Illinois

  • (e) In conformance with Section 41 of the Illinois Franchise Disclosure Act, any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with the Illinois Franchise Disclosure Act or any other law of Illinois is void.
  • (f) No statement, questionnaire or acknowledgement 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 behalf of the Franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

INDIANA

    1. REGISTRATION OF THIS FRANCHISE IN THE STATE OF INDIANA DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE COMMISSIONER.
    1. The following is in addition to the disclosure in Item 8 of the Franchise Disclosure Document:

The requirement for you to purchase products from us or some other entity as we designate in writing, may be unlawful under Indiana Law. Under the Franchise Agreement amended for use in Indiana, if, and to the extent, that requirement is found to be unlawful, that requirement will be void (to the extent unlawful) and you must purchase those products from approved suppliers.

    1. The following is in addition to the disclosure in Item 12 of the Franchise Disclosure Document:
  • (a) Under the Franchise Agreement amended for use in Indiana, we are prohibited from establishing a Franchisor owned outlet engaged in a substantially identical business to that of the Franchise Business within your Protected Area, whether or not the business is operated under the Franchise Marks.
    1. The following is in addition to the disclosure in Item 17 of the Franchise Disclosure Document:
  • (a) Under the Franchise Agreement amended for use in Indiana, the post-termination non-competition covenant only applies to your Protected Area and does not include the areas within a radius of any other Azal Coffee franchise location.
  • (b) The Franchise Agreement amended for use in the State of Indiana specifies that the Agreement and the construction of the Agreement will be governed by the laws of the State of Michigan except that the Indiana Franchise Law (Indiana Code 23-2-2.5 and 23-2-2.7) will control where applicable.

MARYLAND

  1. The following is in addition to the disclosure in Item 17 of the Franchise Disclosure Document:

ANY RELEASE CONTAINED IN THE FRANCHISE AGREEMENT OR ANY OTHER AGREEMENT REQUIRED AS A CONDITION OF THE SALE, RENEWAL OR TRANSFER OF THE FRANCHISE WILL NOT APPLY TO ANY LIABILITY UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.

THE FRANCHISE AGREEMENT SPECIFIES THE APPLICATION OF MICHIGAN LAWS AND MICHIGAN VENUE FOR LITIGATION; HOWEVER, YOU MAY BRING AN ACTION UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW IN ANY COURT OF COMPETENT JURISDICTION IN MARYLAND.

ANY CLAIM ARISING UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW MUST BE BROUGHT WITHIN THREE YEARS AFTER THE GRANT OF THE FRANCHISE.

MINNESOTA

    1. The following is in addition to the disclosures in Items 13 and 17 of the Franchise Disclosure Document:
  • (a) MINN. STAT. SECTION 80C.21 and MINNESOTA RULES 2860.4400(J) prohibit the franchisor from requiring litigation to be conducted outside Minnesota, requiring waiver of a jury trial, or requiring the franchisee to consent to liquidated damages, termination penalties or judgment notes. In addition, nothing in the Franchise Disclosure Document or agreements can abrogate or reduce: (1) any of the franchisee's rights as provided for in MINN. STAT. CHAPTER 80C; or (2) franchisee's rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.
  • (b) With respect to franchises governed by Minnesota law, the franchisor will comply with MINN. STAT. SECTION 80C.14 SUBD. 3-5, which require (except in certain specified cases):
    • (i) that a franchisee be given 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement; and
    • (ii) that consent to the transfer of the franchise will not be unreasonably withheld.
  • (c) MINNESOTA RULES 2860.4400(D) prohibits a franchisor from requiring a franchisee to assent to a general release, other than with respect to the voluntary settlement of disputes between us.
  • (d) The franchisee cannot consent to the franchisor obtaining injunctive relief. The franchisor may seek injunctive relief. See MINNESOTA RULES 2860.4400(J) also, a court will determine if a bond is required.
  • (e) The Limitations of Claims section of the Franchise Agreement must comply with MINN. STAT. SECTION 80C.17 SUBD. 5.
  • (f) No statement, questionnaire or acknowledgement 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 behalf of the Franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

Azal Coffee

NEW YORK

  1. REGISTRATION OF THIS FRANCHISE BY NEW YORK STATE DOES NOT MEAN THAT NEW YORK STATE RECOMMENDS IT OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT. IF YOU LEARN THAT ANYTHING IN THE DISCLOSURE DOCUMENT IS UNTRUE, CONTACT THE FEDERAL TRADE COMMISSION AND NEW YORK STATE DEPARTMENT OF LAW, BUREAU OF INVESTOR PROTECTION AND SECURITIES, 120 BROADWAY, 23RD FLOOR, NEW YORK, NEW YORK 10271.

THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU ABOUT ITEMS COVERED IN THE DISCLOSURE DOCUMENT. HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING PROCESS TO PREVAIL UPON A PROSPECTIVE FRANCHISEE TO ACCEPT TERMS THAT ARE LESS FAVORABLE THAN THOSE SET FORTH IN THIS DISCLOSURE DOCUMENT.

  1. Litigation.

Source: Item 23 — RECEIPTS (FDD pages 51–204)

What This Means (2024 FDD)

According to Azal Coffee's 2024 Franchise Disclosure Document, several circumstances could render provisions of the franchise agreement unenforceable, varying by state. In Illinois, any stipulation that requires a franchisee to waive compliance with the Illinois Franchise Disclosure Act or any other Illinois law is considered void. Additionally, in Illinois, franchisees cannot waive claims under state franchise law, including fraud, or disclaim reliance on the franchisor through any statement or acknowledgement.

In Indiana, if the requirement for a franchisee to purchase products from Azal Coffee or a designated supplier is found unlawful under Indiana law, that requirement will be void to the extent it is unlawful. Instead, the franchisee would need to purchase those products from approved suppliers. Furthermore, in Virginia, if any grounds for default or termination stated in the Franchise Agreement do not constitute "reasonable cause" as defined in the Virginia Retail Franchising Act, that provision may not be enforceable. Similarly, any provision involving undue influence by Azal Coffee to induce a franchisee to surrender their rights may also be unenforceable in Virginia.

In North Dakota, several types of provisions are unenforceable. These include agreements requiring arbitration at a remote location, mandating North Dakota franchisees to consent to the jurisdiction of courts outside North Dakota, or requiring consent to liquidated damages or termination penalties. Additionally, franchise agreements specifying governance by the laws of a state other than North Dakota, requiring waiver of a jury trial or exemplary/punitive damages, mandating a general release upon renewal, or including limitations of claims may be deemed unenforceable. Provisions requiring the franchisee to pay all enforcement costs are also subject to modification, allowing the prevailing party to recover costs and attorney's fees.

In Rhode Island, any provision in the Azal Coffee franchise agreement that restricts jurisdiction or venue to a forum outside of Rhode Island or requires the application of another state's laws is void with respect to claims enforceable under the Rhode Island Franchise Investment Act. In Washington, a noncompetition covenant is void and unenforceable against an employee if their annualized earnings are below $100,000, or against an independent contractor if their earnings are below $250,000 annually. Additionally, Azal Coffee cannot restrict a franchisee from soliciting or hiring employees of other franchisees or of the franchisor itself.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.
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