To what extent is the California addendum effective regarding the jurisdictional requirements of California law for City Publications?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
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 CITY PUBLICATIONS FRANCHISE GROUP, INC. shall be amended as follows:
The California Franchise Relations Act provides rights to the Franchise concerning termination or nonrenewal of the Franchise Agreement, which may supersede provisions in the Franchise Agreement, specifically Sections 5.B and 19.
Sections 5B.10 and 20B.2 of the Franchise Agreement require Franchisee to sign a general release as a condition of renewal and transfer of the franchise; such release shall exclude claims arising under California Franchise Investment Law and California Franchise Relations Act.
Section 17A of the Franchise Agreement contains a covenant not to compete which extends beyond the expiration or termination of the Franchise Agreement; this covenant may not be enforceable under California law.
Section 18B.1.h of the Franchise Agreement which terminates the Franchise Agreement upon the bankruptcy of the Franchisee may not be enforceable under federal bankruptcy law (11 U.S.C.
Section 101, et seq.).
- The Franchise Agreement requires litigation to be conducted in a court located in the State of Georgia.
This provision might not be enforceable for any cause of action arising under California law.
- The Franchise Agreement requires application of the laws of the State of Georgia.
This provision might not be enforceable under California law.
- Section 19E of the Franchise Agreement contains a liquidated damages clause.
Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
- Section 24G of the Franchise Agreement requires binding arbitration.
The arbitration will occur at the forum indicated in Section 24B with the costs being borne by the prevailing party.
Prospective franchisees are encouraged to consult legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of the Franchise Agreement restricting venue to a forum in the State of Georgia.
The Department of Financial Protection and Innovation requires that the franchisor defer the collection of all initial fees from California franchisees until the franchisor has completed all its pre-opening obligations and franchisee is open for business.
Each provision of this Amendment shall be effective only to the extent that the jurisdictional requirements of the California Investment Law and/or the California Franchise Relations Act are met independent of this Amendment.
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.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the California addendum aims to ensure compliance with California franchise laws. Several provisions within the Franchise Agreement are specifically amended to align with California's Franchise Investment Law and the California Franchise Relations Act. These amendments address critical aspects such as termination and nonrenewal rights, releases required for renewal and transfer, covenants not to compete, and the enforceability of termination clauses related to franchisee bankruptcy.
Specifically, the addendum clarifies that any requirement for franchisees to sign a general release as a condition of renewal or transfer will exclude claims arising under California's franchise laws. It also acknowledges that non-compete clauses extending beyond the term of the agreement may not be enforceable under California law. Furthermore, the franchisor must defer collecting initial fees from California franchisees until all pre-opening obligations are met and the franchise is open for business.
The addendum also addresses dispute resolution, noting that requirements for litigation to occur in Georgia might not be enforceable for actions arising under California law. Similarly, the application of Georgia law as the governing law may not be enforceable in California. The effectiveness of each provision in the addendum is contingent upon meeting the jurisdictional requirements of California law, independent of the addendum itself. This means that the protections afforded by the addendum are only applicable if California law has jurisdiction over the specific issue.
Overall, the California addendum seeks to modify the standard City Publications franchise agreement to comply with California-specific legal requirements, providing additional protections and rights to franchisees operating in California. However, franchisees should be aware that the effectiveness of these provisions depends on the applicability of California law to their specific circumstances, and consulting with legal counsel is recommended to fully understand their rights and obligations.