Is the liquidated damages clause considered a penalty in the Canine Dimensions franchise agreement?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
Minn. Rule Part 2860.4400J. prohibits a franchisee from waiving his rights to a jury trial or waiving his rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction, or consenting to liquidated damages, termination penalties or judgment notes.
Any provision in the Agreement which would require you to waive your rights to any procedure, forum or remedies provided for by the laws of the State of Minnesota is deleted from any Agreement relating to franchises offered and sold in the State of Minnesota; provided, however, that this paragraph will not affect the obligation in the Agreement relating to arbitration.
Source: Item 22 — CONTRACTS (FDD page 36)
What This Means (2025 FDD)
According to the 2025 Canine Dimensions Franchise Disclosure Document, the enforceability of the liquidated damages clause is subject to state-specific regulations. For franchisees in California, the FDD notes that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. This means that a court might not uphold the clause if it deems the damages to be disproportionate to the actual harm suffered.
For franchisees in Minnesota, the FDD explicitly states that Minnesota Rule Part 2860.4400J prohibits consenting to liquidated damages. Any provision in the Canine Dimensions franchise agreement that requires a franchisee to waive their rights to any procedure, forum, or remedies provided by the laws of Minnesota is deleted from any agreement relating to franchises offered and sold in the State of Minnesota. However, this deletion does not affect the obligation in the agreement relating to arbitration.
This indicates that Canine Dimensions acknowledges the varying legal landscapes across states and has taken steps to ensure compliance. Prospective franchisees should consult with a legal professional to understand the implications of the liquidated damages clause in their specific state and how it might affect their rights and obligations under the franchise agreement.