For a Belocal franchise in California, what is the potential impact of the amendment on the agreement's transfer provision?
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 Belocal's 2025 Franchise Disclosure Document, the amendment to the franchise agreement for California addresses the transfer of a franchise. Specifically, California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning the transfer of a franchise. If any provision in the Belocal Franchise Agreement is inconsistent with California law regarding franchise transfers, the state law will take precedence.
This means that certain clauses within the standard Belocal franchise agreement that might restrict a franchisee's ability to transfer their franchise, or impose conditions on such transfers, could be unenforceable in California if they conflict with the state's franchise laws. This could provide a Belocal franchisee in California with more flexibility and protection when they decide to sell or transfer their business.
Furthermore, the FDD states that a franchisee must sign a general release when transferring their franchise. However, California Corporations Code Section 31512 voids any waiver of rights under the Franchise Investment Law (California Corporations Code Sections 31000 through 31516), and Business and Professions Code Section 20010 voids any waiver of rights under the Franchise Relations Act (Business and Professions Code Sections 20000 through 20043). This ensures that franchisees cannot inadvertently give up their legal protections during the transfer process.
In summary, the California-specific amendments to the Belocal franchise agreement aim to protect franchisees by ensuring that state laws governing franchise transfers supersede any conflicting terms in the agreement. Franchisees should consult with a legal professional to fully understand their rights and obligations when considering a transfer.