For franchisees in Applicable Franchise Registration States, does the Carls franchise agreement allow disclaimers of reliance on statements made by the franchisor?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
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 the 2024 Carls FDD, the franchise agreement does not allow disclaimers of reliance on statements made by the franchisor for franchisees who are residents of Applicable Franchise Registration States. These states include California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.
Specifically, the FDD states that any statement, questionnaire, or acknowledgment signed by a franchisee in connection with starting the franchise relationship cannot waive claims under applicable state franchise law, including fraud in the inducement. It also cannot disclaim reliance on any statement made by Carls, its franchise sellers, or anyone acting on Carls's behalf. This provision takes precedence over any other conflicting term in any document related to the franchise agreement.
This means that Carls franchisees in the listed states retain their legal rights to pursue claims based on misrepresentations or fraud, and any attempt to waive these rights through contractual language is invalid. This protection is particularly important for prospective franchisees as it ensures they can hold Carls accountable for the accuracy and truthfulness of the information provided during the franchise sales process.