Can a Black Bear Diner franchisee terminate the franchise agreement under state law?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement and the rights of the parties will not take effect unless and until this Agreement is accepted and signed by Franchisor. Except to the extent this Agreement or any particular dispute is governed by the U.S. Trademark Act of 1946 or other federal law, this Agreement shall be governed by and construed in accordance with the laws of the State of California (without reference to its conflict of laws principles), excluding any law regulating the sale of franchises or governing the relationship between a franchisor and franchisee (developer), unless the jurisdictional requirements of such laws are met independently without reference to this Section; provided, however, that if the covenants in Section 10 of this Agreement would not be enforceable under the laws of California, and the Development Area is located outside of California, then such covenants shall be interpreted and construed under the laws of the state in which the Development Area is located.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
The 2025 Black Bear Diner Franchise Disclosure Document states that the franchise agreement is governed and construed in accordance with the laws of California, excluding any law regulating the sale of franchises or governing the relationship between a franchisor and franchisee, unless the jurisdictional requirements of such laws are met independently. However, if the non-compete covenants would not be enforceable under California law and the Development Area is located outside of California, then such covenants shall be interpreted and construed under the laws of the state in which the Development Area is located. This means that while the agreement is generally governed by California law, the enforceability of certain provisions, like non-compete clauses, may depend on the laws of the state where the franchise is located.
This choice of law provision has significant implications for a prospective Black Bear Diner franchisee. It means that disputes will generally be resolved under California law, which may be different from the laws of the state where the franchisee's restaurant is located. However, the exception for non-compete clauses provides some protection for franchisees located outside of California, as those clauses will be interpreted under their local state laws if California law would not enforce them. Franchisees should be aware of the specific laws in their state regarding franchise termination and non-compete agreements, as these could impact their rights and obligations under the franchise agreement.
It is important for potential franchisees to consult with an attorney to fully understand the implications of the choice of law provision and how it may affect their rights and obligations under the franchise agreement. They should also inquire about any state-specific laws that may provide additional protections or restrictions beyond what is outlined in the franchise agreement. Understanding these legal nuances is crucial for making an informed decision about investing in a Black Bear Diner franchise.