What is the impact of state law on the provisions of the Black Bear Diner franchise agreement?
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)
According to the 2025 Black Bear Diner Franchise Disclosure Document, the franchise agreement is generally governed by California law, but with specific exceptions to protect the franchisee. The agreement is 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 (developer), unless the jurisdictional requirements of such laws are met independently. This means that while California law typically applies, specific state laws regarding franchising may take precedence if their jurisdictional requirements are met without relying on the agreement's general choice of law provision.
However, there's a significant exception regarding non-compete clauses. If the covenants in Section 10 of the agreement (likely dealing with non-competition) would not be enforceable under California law, and the Development Area is located outside of California, then those specific covenants will be interpreted and construed under the laws of the state where the Development Area is located. This protects Black Bear Diner franchisees operating outside of California from potentially unenforceable non-compete terms under California law, ensuring that the laws of their own state apply to those specific provisions.
This clause aims to balance Black Bear Diner's interests with the franchisee's rights, particularly concerning non-compete agreements, which can vary significantly in enforceability from state to state. Franchisees should be aware of this provision and understand how the laws of their state might affect the enforceability of non-compete clauses within their franchise agreement. It is advisable to consult with legal counsel to fully understand the implications of this choice of law provision, especially concerning the enforceability of the non-compete provisions in their specific state.