In California, what is the requirement regarding the delivery of agreements related to the sale of a Buona franchise?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
ou are open for business. For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.
-
- Item 6 of the Franchise Disclosure Document on "Other Fees" is amended by the addition of the following:
- The maximum annual interest rate in California is 10%.
-
- Item 17 of the Franchise Disclosure Document on "Renewal, Termination, Transfer and Dispute Resolution" is amended by the addition of the following:
California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under
federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law."
The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The Franchise Agreement requires binding arbitration. The arbitration will occur in Illinois with the costs being borne by the losing party. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.05, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a Franchise Agreement restricting venue to a forum outside the State of California.
The Franchise Agreement requires application of the laws of the State of Illinois. This provision may not be enforceable under California law.
The Franchise Agreement states that franchisee must sign a general release if franchisee transfers its franchise or renews or signs a successor Franchise Agreement. California Corporations Code § 31512 voids a waiver of franchisee's rights under the Franchise Investment Law (California Corporations Code §§ 31000 – 31516).
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, California law provides certain rights to franchisees regarding termination, transfer, or nonrenewal of a franchise. The FDD states that if any provision in the Franchise Agreement is inconsistent with California law, the law will take precedence.
Specifically, the document highlights several areas where California law may impact the enforcement of the Franchise Agreement. These include provisions related to termination upon bankruptcy, covenants not to compete extending beyond the franchise term, liquidated damages clauses, requirements for binding arbitration in Illinois, application of Illinois state laws, and the requirement for franchisees to sign a general release when transferring their franchise or renewing/signing a successor agreement. California law may render some of these provisions unenforceable or void.
Furthermore, the FDD includes a note for prospective franchisees in California regarding a Franchise Acknowledgement Questionnaire. Franchisees in California are instructed NOT to complete the questionnaire. This questionnaire is designed to confirm that the franchisee has reviewed and understands the Franchise Agreement, but California franchisees are exempt from this requirement. Buona franchisees should seek independent legal counsel to understand their rights and obligations under California law, especially concerning the enforceability of specific clauses within the Franchise Agreement.