If Canine Dimensions terminates the agreement, can the franchisee avoid liquidated damages?

According to Canine Dimensions's 2025 Franchise Disclosure Document, whether a franchisee can avoid liquidated damages if Canine Dimensions terminates the agreement depends on the state where the franchise operates. Specifically, for franchises offered and sold in the State of Minnesota, the FDD states that Minnesota Rule Part 2860.4400J prohibits a franchisee from consenting to liquidated damages. Therefore, any provision in the agreement requiring a franchisee to waive their rights to remedies provided by Minnesota law is deleted from the agreement, although this does not affect obligations relating to arbitration.

For franchisees in California, the FDD notes that the Franchise Agreement contains a liquidated damages clause, but under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. Additionally, for the purposes of Cal. Bus. & Prof. Code Section 20022, the parties agree that Canine Dimensions' right of offset will include liquidated damages.

For prospective franchisees, this means that the enforceability of liquidated damages clauses can vary significantly based on state law. Franchisees operating outside of Minnesota and California may be subject to the liquidated damages clauses in the franchise agreement if Canine Dimensions terminates the agreement. It would be prudent for a prospective franchisee to seek legal counsel to understand the specific implications of these clauses in their state and to negotiate terms that are most favorable to them.