Does the release by Belocal's Franchisor cover claims arising after the execution of the Transfer Agreement?
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.]
2. Unknown Claims.
- (a) Franchisee acknowledges for itself and the Franchisee Related Parties that there is a risk that, subsequent to the execution of this Agreement, it will discover, incur, or suffer Claims which are unknown or unanticipated at the time this Agreement is executed, including, without limitation, unknown or unanticipated Claims which arose from, are based upon, or are related to the Franchise Agreement or some part or aspect thereof, which if known by Franchisee on the date this Agreement is being executed may have materially affected its decision to execute this Agreement.
- (b) Franchisee acknowledges and agrees for itself and the Franchisee Related Parties that by reason of the release contained in Section 1 above, it is assuming the risk of such unknown and unanticipated Claims; and agrees that its release of the Releasees contained in this Agreement applies thereto.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the release provided by the transferor generally covers claims against Belocal, its predecessors, subsidiaries, and affiliates. This release includes all actions, causes of action, suits, debts, liens, obligations, promises, liabilities, claims, rights, demands, damages, controversies, losses, costs, and expenses, including attorney's fees, whether known or unknown, suspected or unsuspected, fixed or contingent. The release extends to claims that the transferor has, had, or claims to have against Belocal, arising out of or relating to the Franchise Agreement.
For franchisees in California, the agreement includes a waiver of rights under California Civil Code Section 1542, which typically protects against releasing unknown claims. This means that the release is intended to cover all claims, even those not known or suspected at the time of execution. However, for franchisees in Washington, the release does not apply to claims arising under the Washington Franchise Investment Protection Act.
Belocal's FDD also states that the franchisee acknowledges the risk of discovering claims after the agreement is executed, which were unknown or unanticipated at the time of execution. By agreeing to the release, the franchisee assumes the risk of such unknown claims, and the release applies to them. This comprehensive release suggests that, except for the specific exclusions noted for Washington franchisees, the intent is to cover a broad range of claims, including those that might arise or be discovered after the execution of the transfer agreement.