For a Belocal franchise in California, what is the effect of the amendment on the entire franchise relationship?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
- a. California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If the Agreement contains a provision that is inconsistent with the law, the law will control.
- b. The Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
- c. The Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
- d. The Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
- e. The Agreement requires application of the laws of Texas. This provision may not be enforceable under California law.
- f. The Agreement requires binding arbitration. The arbitration will occur in the city in which Franchisor maintains its principal business office at the time of the arbitration with the costs being borne by initially be paid equally by the two sides to the arbitration. The arbitrator must award to the prevailing party the reasonable costs and fees, including attorneys' fees, incurred in the arbitration. Prospective franchisees 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 the Agreement restricting venue to a forum outside the State of California.
- g. The following statement is added to the Agreement: No statement, questionnaire, or acknowledgment 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 any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the amendment for California franchises addresses inconsistencies between the standard franchise agreement and California law. The amendment explicitly states that California Business and Professions Code Sections 20000 through 20043, which concern termination, transfer, or non-renewal of a franchise, will take precedence over any conflicting provisions in the agreement. This ensures that Belocal franchisees in California are afforded the rights and protections provided by California law in these critical areas of the franchise relationship.
Several specific clauses within the standard Belocal franchise agreement are addressed by the California amendment. These include potential issues regarding termination upon bankruptcy, covenants not to compete extending beyond the franchise term, liquidated damages clauses, the application of Texas laws, and binding arbitration requirements. The amendment clarifies that California law will govern these aspects, potentially overriding the original terms of the franchise agreement if they are inconsistent with California statutes. For example, California law may render a covenant not to compete unenforceable, or modify the terms of arbitration to ensure fairness and compliance with California regulations.
Furthermore, the amendment includes a statement ensuring that no document signed by the franchisee at the start of the franchise can waive rights under California franchise law or disclaim reliance on franchisor statements, including those related to fraud. This provision strengthens franchisee protections against potentially overreaching clauses or misrepresentations made during the initial franchising process. By explicitly prioritizing California law and protecting franchisees' rights, the amendment aims to create a fairer and more legally sound franchise relationship for Belocal franchisees operating in California.