If there is a conflict of laws, which law prevails in the Belocal franchise agreement?

According to Belocal's 2025 Franchise Disclosure Document, the franchise agreement specifies that the laws of Texas govern the agreement. However, this may not be enforceable under California law. Specifically, if any provision in the agreement is inconsistent with California Business and Professions Code Sections 20000 through 20043, which provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise, then California law will take precedence.

This means that while the agreement is written to be governed by Texas law, certain provisions might be superseded by the laws of the state where the franchisee operates, particularly concerning franchise rights and protections. For example, the agreement contains a covenant not to compete which extends beyond the termination of the franchise, but this provision may not be enforceable under California law. Similarly, the agreement contains a liquidated damages clause, but under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.

Furthermore, the FDD includes amendments for specific states like North Dakota, where certain sections of the agreement are modified to comply with local laws. For instance, the governing law in Section 14.A. is changed from "Texas" to "North Dakota" for franchisees in North Dakota. Additionally, a statement is added to the agreement ensuring that no franchisee statement waives claims under state franchise law. These amendments highlight that state-specific laws can override the general terms of the franchise agreement.

Prospective franchisees should be aware that while the Belocal franchise agreement is generally governed by Texas law, the enforceability of specific provisions can vary depending on the franchisee's location. It is crucial to consult with legal counsel to understand how local laws may impact the franchise agreement and to ensure compliance with all applicable regulations.