To what extent will Boulder Designs and the franchisee enforce the provisions of the agreement in South Dakota?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 16.2 of the Franchise Agreement are amended by the addition of the following language to the original language that appears therein: "Covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in South Dakota, except in certain instances as provided by law." To the extent this Addendum shall be deemed to be inconsistent with any terms or conditions of said Franchise Agreement or Exhibits or Attachments thereto, the terms of this Addendum shall govern.
Sections 16.2 and 16.3 of the Franchise Agreement are amended by the following language: South Dakota law provides for a Thirty Day (30) notice to cure any default prior to termination, including the non-payment of royalty and service fees, amount due for purchases from Franchisor or its affiliates or other payments due to Franchisor.
Section 23.1 of the Franchise Agreement is amended by the addition of the following language to the original language that appears therein: "The law regarding franchise registration, employment, covenants not to compete, and other matters of local concern will be governed by the laws of the State of South Dakota; but as to contractual and all other matters, this agreement and all provisions of this instrument will be and remain subject to the application, construction, enforcement, and interpretation under the governing law of Texas."
Section 23.7 of the Franchise Agreement is amended by the addition of the following language to the original language that appears therein: "In the event that either party shall make demand for mediation, such mediation shall be conducted in a mutually agreed upon site.
The mediation proceeding shall take place in the McLennan County, Texas.
In connection with any mediation proceeding the provisions of Rule 408 of the Federal Rules of Evidence."
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, the enforceability of the franchise agreement in South Dakota is specifically addressed through amendments to the standard agreement. These amendments reflect considerations of South Dakota law, particularly regarding covenants not to compete and dispute resolution.
Specifically, the FDD states that covenants not to compete are generally unenforceable in South Dakota, except as provided by law. Additionally, while the franchise agreement is generally subject to Texas law, the laws of South Dakota will govern matters regarding franchise registration, employment, and covenants not to compete. This indicates that Boulder Designs acknowledges and will adhere to South Dakota's specific legal requirements in these areas. The FDD also notes that South Dakota law mandates a thirty-day notice to cure any default before termination of the agreement, including non-payment of fees or amounts due.
Furthermore, the FDD addresses dispute resolution, stating that while mediation proceedings will take place in McLennan County, Texas, the site of mediation must be mutually agreed upon by both parties. This suggests a willingness from Boulder Designs to ensure that dispute resolution processes are fair and convenient for the franchisee. These amendments collectively demonstrate that Boulder Designs intends to enforce the franchise agreement in South Dakota while also respecting and complying with the state's specific legal protections for franchisees.