Under what grounds is a Chem Dry franchisee permitted to terminate the Franchise Agreement?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
This Addendum relates to franchises sold in the state of New York and is intended to comply with New York statutes and regulations. In consideration of the execution of the Franchise Agreement, CDI and FRANCHISEE agree to amend the Agreement as follows:
- Section 17.J of the Franchise Agreement are amended by adding the following sentence at the end of each Section:
"However, that all rights arising in Franchisee's favor from the provisions of Article 33 of the General Business Law of the State of New York and the regulations issued thereunder shall remain in force; it being the intent of this proviso that the non-waiver provisions of General Business Law, Sections 687.4 and 687.5, be satisfied."
- Section 17.H of the Franchise Agreement is amended by adding the following sentence at the end of the Section:
"The foregoing choice of law should not be considered a waiver of any right conferred upon Franchisee by the General Business Law of the State of New York, Article 33."
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- Notwithstanding anything to the contrary in the Franchise Agreement, you shall be permitted to terminate the Franchise Agreement upon any grounds available by law.
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- In all other respects, the Franchise Agreement will be construed and enforced according to its terms.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, a franchisee's right to terminate the Franchise Agreement depends on the state where the franchise operates. For franchises sold in New York, the Franchise Agreement is amended to state that the franchisee is permitted to terminate the agreement upon any grounds available by law. This provision ensures that all rights arising in the franchisee's favor from the provisions of Article 33 of the General Business Law of the State of New York and the regulations issued thereunder remain in force, satisfying the non-waiver provisions of General Business Law, Sections 687.4 and 687.5.
In contrast, the document does not specify explicit grounds for termination available to franchisees in other states. The Virginia addendum indicates that if any ground for default or termination stated in the franchise agreement does not constitute "reasonable cause" as defined in the Virginia Retail Franchising Act or the laws of Virginia, that provision may not be enforceable. This suggests that Virginia franchisees are subject to the termination clauses outlined in the standard franchise agreement, but those clauses must align with the state's definition of reasonable cause.
Prospective Chem Dry franchisees should carefully review the Franchise Agreement and any state-specific addenda to fully understand their termination rights. It is essential to consult with a legal professional to interpret these provisions in light of applicable state laws and to assess the potential implications for their investment. Franchisees should also inquire with Chem Dry about specific instances or conditions under which a franchisee-initiated termination has been permitted in the past to gain a clearer understanding of the practical application of these clauses.