To what extent is each provision of the South Dakota Amendment effective for a Boulder Designs franchise?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 3.1 of the Franchise Agreement is amended to reflect that payment of Franchise Fee will be deferred until Franchisor has met its initial obligations to Franchisee, and Franchisee has commenced doing business.
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.
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, several provisions within the Franchise Agreement are specifically amended for franchisees operating in South Dakota. These amendments address key aspects of the franchise relationship, including franchise fee payments, non-compete clauses, dispute resolution, and governing law. These changes are designed to align the agreement with South Dakota law and protect the interests of franchisees within the state.
Specifically, the payment of the franchise fee is deferred until Boulder Designs has fulfilled its initial obligations to the franchisee and the franchisee has commenced business operations. This adjustment reduces the upfront financial burden on new franchisees and ensures that they only pay the fee once the franchisor has provided the necessary support to begin operations. Furthermore, the agreement clarifies that covenants not to compete are generally unenforceable in South Dakota, except in certain legally defined instances. This provides franchisees with more flexibility and reduces potential restrictions on their business activities after the franchise term ends.
In terms of dispute resolution, the amendment stipulates that mediation must occur at a mutually agreed-upon site. Additionally, South Dakota law will govern matters related to franchise registration, employment, and non-compete agreements, while Texas law will apply to contractual and other general matters. This blended approach ensures that local concerns are addressed under South Dakota law while maintaining a consistent framework for contractual interpretation. Finally, franchisees are entitled to a thirty-day notice to cure any default prior to termination, including non-payment of fees or amounts due, providing an opportunity to resolve issues before termination occurs.
These amendments collectively aim to balance the interests of Boulder Designs and its franchisees in South Dakota, ensuring compliance with local laws and providing franchisees with certain protections and flexibility. Prospective franchisees should carefully review these amendments to understand their rights and obligations under the Franchise Agreement within the context of South Dakota law.