Are there any exceptions to the choice of law governing the Black Bear Diner 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 FDD, the Black Bear Diner agreement is generally governed by California law. However, there are a couple of exceptions to this rule. First, if the U.S. Trademark Act of 1946 or other federal law governs a particular dispute, then federal law will apply instead of California law. Second, if the non-compete covenants in Section 10 of the agreement would not be enforceable under California law, and the Development Area is located outside of California, then the laws of the state where the Development Area is located will govern those specific covenants.
In practical terms, this means that a Black Bear Diner franchisee may find that different laws apply to different aspects of their agreement, depending on the specific issue in dispute and where their Development Area is located. For instance, a dispute over trademark usage would likely be governed by federal law, while a dispute over a non-compete agreement might be governed by the law of the state where the franchise is located, if California law would not enforce the non-compete.
This type of clause is fairly common in franchise agreements, as franchisors often choose the law of their home state to govern the agreement for consistency and familiarity. However, the exception for non-compete agreements is notable, as it suggests that Black Bear Diner is willing to abide by the laws of the state where the franchise is located if those laws are more protective of franchisees in terms of non-compete enforceability. Prospective franchisees should be aware of these exceptions and understand which laws will govern different aspects of their agreement.