For a Belocal franchise in California, what is the effect of the amendment on the franchisee's rights concerning transfer?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to the 2025 Belocal Franchise Disclosure Document, California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning the transfer of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control. This means that California law takes precedence over any conflicting terms in the Belocal franchise agreement regarding franchise transfers.
Specifically, the FDD states that you must sign a general release if you transfer your franchise. However, California Corporations Code Section 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code Sections 31000 through 31516). Business and Professions Code Section 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code Sections 20000 through 20043).
In practical terms, this amendment ensures that Belocal franchisees in California retain all rights granted to them under California franchise law, regardless of what the franchise agreement might state. This protects franchisees from unknowingly waiving their legal protections during a transfer. Prospective franchisees should consult with a legal professional to fully understand their rights and obligations under California law before signing any franchise agreement or transfer documents.