How are the Franchise Agreement and Supplemental Agreements for Chop5 Salad Kitchen franchises in Indiana to be construed?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
INDIANA
In recognition of the requirements of the Indiana Franchise Disclosure Law, IC 23-2-2-2.5, the Franchise Agreement and Supplemental Agreements are amended as follows:
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- The laws of the State of Indiana supersede any provisions of the Disclosure Document, Franchise Agreement and Supplemental Agreements if such provisions are in conflict with Indiana law.
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- The Franchise Agreement and Supplemental Agreements are amended to provide that such agreements will be construed in accordance with the laws of the State of Indiana.
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- Any provision in the Franchise Agreement which designates jurisdiction or venue, or requires the franchisee to agree to jurisdiction or venue, in a forum outside of Indiana, is deleted from any Franchise Agreement and Supplemental Agreement issued in the State of Indiana.
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- The prohibition by Indiana Code § 23-2-2.7-1(7) against unilateral termination of the franchise without good cause or in bad faith, good cause being defined therein as material breach of the Franchise Agreement or Supplemental Agreement (as applicable), shall supersede the provisions of the Franchise Agreement or Supplemental Agreement (as applicable) in the State of Indiana to the extent they may be inconsistent with such prohibition.
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- The covenant not to compete that applies after the expiration or termination of the Franchise Agreement is hereby modified to the extent necessary to comply with Indiana Code 23-2-2.7-1(9).
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- Liquidated damages and termination penalties are prohibited by law in the State of Indiana and, therefore, the Disclosure Document, the Franchise Agreement and Supplemental Agreements are amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such termination, and in addition to the obligations of the franchisee as otherwise provided, or in the event of termination or cancellation of the Franchise Agreement under any of the other provisions therein, the franchisee nevertheless shall be, continue and remain liable to franchisor for any and all damages which franchisor has sustained or may sustain by reason of such default or defaults and the breach of the Franchise Agreement on the part of the franchisee for the unexpired Term of the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, the Franchise Agreement and Supplemental Agreements for franchises in Indiana are subject to specific amendments to comply with Indiana law. The laws of Indiana will take precedence over any conflicting provisions in the Disclosure Document, Franchise Agreement, and Supplemental Agreements. Specifically, these agreements will be interpreted and construed in accordance with Indiana law. Any clause designating jurisdiction or venue outside of Indiana is deleted from agreements issued in Indiana.
Furthermore, Indiana law prohibits unilateral termination of the franchise without good cause or in bad faith, defining good cause as a material breach of the Franchise Agreement or Supplemental Agreement. This supersedes any inconsistent provisions in the agreements. The covenant not to compete after the franchise term is modified to comply with Indiana Code.
Finally, the FDD states that liquidated damages and termination penalties are prohibited in Indiana. Therefore, all references to these are deleted from the Disclosure Document, Franchise Agreement, and Supplemental Agreements. However, even with such termination, the franchisee remains liable for damages sustained by the franchisor due to the franchisee's default or breach of the Franchise Agreement for the unexpired term.