For franchisees in Applicable Franchise Registration States, does the Carls franchise agreement allow waivers of claims under state franchise law?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
I. FOR THE FOLLOWING STATES ONLY: CALIFORNIA, HAWAII, ILLINOIS, INDIANA, MARYLAND, MICHIGAN, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA, VIRGINIA, WASHINGTON, WISCONSIN
If Franchisee is a resident of one of the states listed in the heading of this Section 32.I (the "Applicable Franchise Registration State") or a non-resident who is acquiring franchise rights permitting the location of the Franchised Restaurant in the Applicable Franchise Registration State, then the following applies:
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, for franchisees residing in or planning to operate a franchise in an Applicable Franchise Registration State, the franchise agreement does not allow waivers of claims under state franchise law. The Applicable Franchise Registration States are California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.
Specifically, the franchise agreement states that no statement, questionnaire, or acknowledgment signed by a franchisee can waive claims under any applicable state franchise law, including claims of fraud. This also means franchisees cannot disclaim reliance on statements made by Carls, franchise sellers, or anyone acting on Carls's behalf. This provision takes precedence over any other conflicting terms in any document related to the franchise agreement.
This protection is significant for franchisees in those states, as it ensures they retain their legal rights and recourse under state franchise laws, regardless of any agreements or statements made during the franchise commencement. This helps to protect franchisees from potentially overreaching franchisor actions or misrepresentations.