If the Chesters Franchise Agreement requires application of Alabama law, is this provision always enforceable under California law?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
The following paragraphs are added at the end of the chart in Item 17 of the Franchise Disclosure Document:
California Business and Professions Code Sections 20000 through 20043 provide rights to franchisees concerning transfer, termination or nonrenewal of a franchise. If the Agreement contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The Agreement requires application of the laws of the State of Alabama. This provision might not be enforceable under California law.
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the enforceability of the Franchise Agreement's Alabama governing law provision is not guaranteed under California law. Specifically, the California addendum to Item 17 of the FDD addresses potential conflicts between the Chesters Franchise Agreement and California law.
The addendum states that California Business and Professions Code Sections 20000 through 20043 grant specific rights to franchisees regarding franchise transfer, termination, or nonrenewal. If any part of the Chesters agreement clashes with these California laws, the state law will take precedence.
Furthermore, the addendum directly addresses the Alabama governing law provision, noting that it 'might not be enforceable under California law.' This means a California court might refuse to apply Alabama law if it conflicts with California's franchise regulations or public policy. Prospective franchisees in California should consult with legal counsel to understand their rights and how California law may protect them, regardless of the governing law stated in the franchise agreement.