For Carls franchisees, what is the scope of the disclaimer prohibition in the rider?
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 Carls FDD, a rider is added to the Franchise Disclosure Document for 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 addresses the enforceability of certain agreements signed by the franchisee.
The rider explicitly states that no agreement signed by a Carls franchisee at the start of their franchise relationship can waive claims under applicable state franchise law. This includes claims related to fraud in the inducement, which refers to instances where the franchisee believes they were misled into signing the agreement due to false representations by Carls. Furthermore, franchisees cannot disclaim reliance on statements made by Carls, its sellers, or anyone acting on its behalf.
This provision is designed to protect Carls franchisees by ensuring they retain their legal rights and recourse, regardless of any waivers or disclaimers they may have signed. It supersedes any conflicting terms in other documents executed in connection with the franchise agreement. This means that even if a franchisee has signed a document that appears to waive certain rights, this rider ensures those rights are still protected under the specified state laws. This addendum aims to provide additional protection to franchisees in states with franchise-specific laws, preventing Carls from enforcing waivers that could undermine those protections.