What is the effect of the California Franchise Relations Act on the Chocolate Bash Franchise Agreement?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
ll incur 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.
-
- 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. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
-
- To the extent this Addendum shall be deemed to be inconsistent with any terms or conditions of said Franchise Agreement or exhibits or attachments thereto, the terms of this Addendum shall govern.
-
- Each owner of the franchise s required to execute a personal guaranty.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, the California Franchise Relations Act impacts the franchise agreement in several key ways. The Franchise Agreement is specifically amended to recognize the requirements of both the California Franchise Investment Law and the California Franchise Relations Act.
Specifically, the California Franchise Relations Act grants franchisees rights concerning the termination or non-renewal of their Franchise Agreement, which may override certain provisions in the standard Chocolate Bash agreement, particularly Sections 3.2 and 14.2. Additionally, Section 14.2 (c)(iii), which allows termination upon the franchisee's bankruptcy, might not be enforceable due to federal bankruptcy law.
Furthermore, the non-compete covenant in Section 13.2, which extends beyond the agreement's expiration or termination, may not be enforceable under California law. The addendum also addresses liquidated damages clauses, noting that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
Finally, Chocolate Bash is required to defer the collection of initial fees from California franchisees until all pre-opening obligations are met and the franchise is open for business due to the Department's determination that Chocolate Bash has not demonstrated adequate capitalization. For franchisees in California who sign a development agreement, the payment of development and initial fees for a specific unit is deferred until that unit is open.