What California laws are recognized in the addendum to the Chocolate Bash Franchise Agreement?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
cur on termination of this Agreement as a result of Franchisee's default is difficult and the parties desire certainty in this matter and agree that the lump sum payment provided under this Section is reasonable in light of the damages for premature termination that Franchisor will incur. This payment is not exclusive of any other remedies that Franchisor may have including attorneys' fees and costs.
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- In recognition of the requirements of the California Franchise Investment Law, Cal. Corp. Code §§31000-31516 and the California Franchise Relations Act, Cal. Bus. And Prof. Code §§20000-20043, the Franchise Agreement for Chocolate Bash is amended as follows:
- ¡ The California Franchise Relations Act provides rights to Franchisee concerning termination or non-renewal of the Franchise Agreement, which may supersede provisions in the Franchise Agreement, specifically Sections 3.2 and 14.2.
- ¡ Section 14.2 (c)(iii), which terminates the Franchise Agreement upon the bankruptcy of Franchisee, may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101, et seq.).
- ¡ Section 13.2 contains a covenant not to compete that extends beyond the expiration or termination of the Agreement; this covenant may not be enforceable under California Law.
- ¡ Paragraph 1 of this Addendum contains a liquidated damages clause.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the addendum to the franchise agreement recognizes several California laws. These include the California Franchise Investment Law (Cal. Corp. Code §§31000-31516) and the California Franchise Relations Act (Cal. Bus. And Prof. Code §§20000-20043). The addendum specifically addresses how these laws may impact certain provisions within the standard Chocolate Bash Franchise Agreement.
The California Franchise Relations Act grants franchisees rights regarding termination or non-renewal of their franchise agreement, which could override sections 3.2 and 14.2 of the Chocolate Bash agreement. Additionally, section 14.2 (c)(iii), which allows termination upon the franchisee's bankruptcy, might not be enforceable due to federal bankruptcy law. The addendum also notes that the covenant not to compete in section 13.2, which extends beyond the agreement's term, may not be enforceable under California law.
Furthermore, paragraph 1 of the addendum contains a liquidated damages clause, but under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. This means that Chocolate Bash franchisees in California should be aware that some standard terms in the franchise agreement are modified or superseded by California-specific legal protections. The addendum serves to reconcile the franchise agreement with California law, providing additional clarity and protection for franchisees operating in that state.
Finally, the FDD stipulates that each owner of the Chocolate Bash franchise is required to execute a personal guaranty, which could jeopardize the marital assets of non-owner spouses domiciled in community property states such as California.