For Carls franchisees, what is the effect of the rider on the franchise disclosure document?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
The following language is hereby added to the Franchise Disclosure Document if you are a resident of one of the states listed in the heading of this Rider (the "Applicable Franchise Registration State") or a non-resident who is acquiring franchise rights permitting the location of one or more Carl's Jr. Restaurants in the Applicable Franchise Registration State:
"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 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Carls includes a rider to the state addendum that affects franchisees residing in or planning to operate a Carl's Jr. restaurant in California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, or Wisconsin. This rider ensures that no agreement signed by the franchisee waives claims under state franchise law, including fraud, or disclaims reliance on statements made by Carls or its representatives. This provision takes precedence over any conflicting terms in other documents.
For franchisees in Washington, the addendum acknowledges that the Washington Franchise Investment Protection Act may supersede the franchise agreement, particularly in areas of termination and renewal. The addendum also specifies that in case of legal conflicts, the provisions of the Act will prevail. Furthermore, any release or waiver of rights by the franchisee cannot include rights under the Act, unless it is part of a negotiated settlement with independent counsel after the agreement is in effect. The addendum clarifies that restrictions on the statute of limitations or rights to a jury trial may not be enforceable.
For franchisees in Minnesota, the addendum reinforces protections under Minnesota statutes and regulations. It states that Carls cannot require litigation outside of Minnesota, enforce jury trial waivers, or impose liquidated damages or termination penalties. The addendum also ensures franchisees' rights to use trademarks are protected and that they are indemnified against claims related to trademark use. Franchisees in Minnesota cannot be forced to agree to a general release or waive their right to seek injunctive relief, and the agreement must comply with Minnesota's limitations period for claims.
In Hawaii, the addendum states that the franchises have been filed under the Franchise Investment Law, but this filing does not constitute approval or endorsement by the Director of Commerce and Consumer Affairs. It also emphasizes that franchisees must receive the disclosure document and all proposed agreements at least seven days before signing any binding agreement or paying any consideration. The addendum serves to highlight and protect franchisee rights under specific state laws, ensuring that the franchise agreement adheres to local regulations and provides franchisees with certain legal safeguards.