Does the Chocolate Bash franchise agreement specify which state's laws govern the agreement?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
[Item 22: CONTRACTS]
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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. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
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- 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.
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- Each owner of the franchise s required to execute a personal guaranty. Doing do could jeopardize the marital assets of non-owner spouses domiciled in community property states such as California.
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- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business. For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Addendum, and understands and consents to be bound by all of its terms.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, the Chocolate Bash franchise agreement includes an addendum specific to California, indicating that California laws and regulations are relevant to franchisees operating in that state.
Specifically, the addendum acknowledges the California Franchise Investment Law and the California Franchise Relations Act, noting that these laws may supersede certain provisions within the standard Chocolate Bash Franchise Agreement. These provisions relate to termination, non-renewal, covenants not to compete, and liquidated damages.
For prospective franchisees in California, this means that certain clauses in the standard agreement may not be fully enforceable under California law, offering some additional protections. The addendum also addresses specific concerns related to personal guarantees and the potential impact on marital assets in community property states like California. Additionally, it mentions a fee deferral condition imposed by the California Commissioner, which defers the collection of initial fees from California franchisees until pre-opening obligations are met and the business is open.