What is the effect of the parties acknowledging that the Belocal Transfer Agreement includes claims they do not know or suspect to exist?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
[For California franchisees, add: Each of the Releasing Parties expressly waives and relinquishes all rights and benefits which either may now have or in the future have under and by virtue of California Civil Code Section 1542. The Releasing Parties do so understanding the significance and consequence of such specific waiver. Section 1542 provides that "[a] general release does not extend to claims which the creditor does not know or suspect exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." For the purpose of implementing a general release and discharge as described in Section 1 above, the Releasing Parties expressly acknowledge that this Agreement is intended to include in its effect, without limitation, all claims described in Section 1 above which the Releasing Parties do not know or suspect to exist in their favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such claims.]
[FOR WASHINGTON FRANCHISEES, ADD: This General Release does not apply with respect to claims arising under the Washington Franchise Investment Protection Act, RCW 19.100, and the rules adopted thereunder.]
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the parties to the Transfer Agreement acknowledge that the agreement is intended to include all claims, even those unknown or unsuspected at the time of execution. This acknowledgment means that the parties are assuming the risk that claims they don't currently know about could arise in the future, and they are agreeing to release the other party from any liability related to those claims. This is particularly relevant for franchisees in California, where California Civil Code Section 1542 states that a general release does not extend to claims which the creditor does not know or suspect to exist.
For California franchisees, Belocal includes a specific waiver of rights and benefits under California Civil Code Section 1542. By agreeing to this waiver, the parties are giving up their right to pursue claims they may later discover, even if those claims would have materially affected their decision to enter into the agreement. This waiver is intended to provide a comprehensive release and discharge, ensuring that all potential claims, known or unknown, are extinguished upon execution of the Transfer Agreement.
However, the FDD also notes an important exception: for transfers in Washington state, the release does not apply to claims arising under the Washington Franchise Investment Protection Act. This means that Washington franchisees retain their rights to pursue claims related to franchise investment protection, even if they are unknown at the time of the transfer. Prospective Belocal franchisees should carefully consider the implications of these release provisions and consult with an attorney to fully understand their rights and obligations before signing the Transfer Agreement.