What is the impact of state law on the provisions of the Cr3 American Exteriors franchise agreement?
Cr3_American_Exteriors Franchise · 2025 FDDAnswer from 2025 FDD Document
.
ITEM 23 RECEIPTS
Exhibit H contains two copies of a Receipt of our Disclosure Document. You must sign, date and deliver one copy of the Receipt Page to us for our records.
EXHIBIT A-STATE SPECIFIC ADDENDA TO THE FRANCHISE DISCLOSURE DOCUMENT AND FRANCHISE AGREEMENT
The following State Specific Addendum applies to the Tectum Franchising LLC d/b/a CR3 American Exteriors Disclosure Document and may supersede, to the extent then required by valid applicable state law, certain portions of the Franchise Agreement dated and all related agreements.
The provisions of this State Specific Addendum to Franchise Disclosure Document and Franchise Agreement apply only to those persons residing or operating CR3 American Exteriors LLC in the following states: California, Hawaii, Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, South Dakota, Rhode Island, Virginia, Washington, and Wisconsin.
CALIFORNIA
California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination, transfer, or non-renewal of a franchise. If the Franchise Agreement or Agreement contains provisions that are inconsistent with the law, the law will control.
The Franchise Agreement provide for termination upon bankruptcy. This provision may not be enforceable under Federal Bankruptcy Law (11 U.S.C.A. Sec. 101 et. seq.).
The Franchise Agreement contain covenants not to compete which extend beyond the termination of the agreements. These provisions may not be enforceable under California law.
Section 31125 of the California Corporation Code requires the franchisor to provide you with a disclosure document before asking you to agree to a material modification of an existing franchise.
Neither the franchisor, any person or franchise broker in Item 2 of the Disclosure Document is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 79a et. seq., suspending or expelling such persons from membership in such association or exchange.
Prospective franchisees are encouraged to consult private 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 a franchise agreement restricting venue to a forum outside the State of California.
The Franchise Agreement require application of the laws of Virginia. This provision may not be enforceable under California law.
The franchise agreement requires a shortened statute of limitations period. Pursuant to Corporations Code Section 31512, this provision is void, to the extent that it is inconsistent with the provisions of Corporations Code Sections 31303 and 31304.
You must sign a general release if you renew or transfer your franchise. California Corporation Code 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code 31000 through 31516). Business and Professions Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
OUR WEBSITE, www.cr3america.com, HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF FINANCIAL PRETECTION AND INNOVATION. ANY COMPLAINTS CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF FINANCIAL PROTECTION AND INNOVATION at www.dfpi.ca.gov.
The highest interest rate allowed by law in California is ten percent (10%) annually.
Item 5 of the FDD is modified with the addition of the following language: "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."
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise."
Special Risks to Consider About This Franchise
California requires that the following risk(s) be highlighted:
Unregistered Trademark. The primary trademark that you will use in your business is not federally registered. If the franchisor's right to use this trademark in your area is challenged, you may have to identify your business and its products or services with a name that differs from that used by other franchisees or the franchisor. This change can be expensive and may reduce brand recognition of the products or services you offer.
The registration of this franchise offering by the California Department of Financial Protection and Innovation does not constitute approval, recommendation, or endorsement by the commissioner.
HAWAII
Item 5 of the Franchise Disclosure Document and Item 4.1 of the Franchise Agreement are modified with the addition of the following language: 'The franchisor defers the collection of all initial fees from Hawaii franchisees until the franchisor has completed all its pre-opening obligations and franchisee is open for business.
ILLINOIS
As to franchises governed by the Illinois Franchise Disclosure Act, if any of the terms of the Disclosure Document are inconsistent with the terms below, the terms below control.
Illinois law governs the Franchise Agreement.
- a In conformance with Section 4 of the Illinois Franchise Disclosure Act, any provision in a franchise agreement that designates jurisdiction and venue in a forum outside of the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.
- b The conditions under which your Franchise Agreement can be terminated and your rights upon nonrenewal may be affected by Sections 19 and 20 of the Illinois Franchise Disclosure Act.
- c In conformance with Section 41 of the Illinois Franchise Disclosure Act, any condition, stipulation, or provision of the Franchise Agreement purporting to bind you to waive compliance with any provision of the Illinois Franchise Disclosure Act or any other law of the State of Illinois is void.
Item 5 of the FDD and Item 4 of the Franchise Agreement are modified with the addition of the following language:
"Payment of the Initial Fees will be deferred until Franchisor has met its obligations to franchisee, and franchisee has commenced doing business. This financial assurance requirement was imposed by the Office of the Illinois Attorney General due to Franchisor's financial condition."
The Franchisor reserves the right to implement "cross-territorial protocols". Make sure you ask and understand how such protocols will impact your franchised business and territory.
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 23 — RECEIPTS (FDD pages 53–150)
What This Means (2025 FDD)
According to the 2025 Cr3 American Exteriors FDD, state laws can significantly impact the franchise agreement. Exhibit A provides state-specific addenda that may supersede certain portions of the standard franchise agreement to comply with local laws. These addenda apply to franchisees residing or operating in California, Hawaii, Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, South Dakota, Rhode Island, Virginia, Washington, and Wisconsin.
For example, in California, the state's Business and Professions Code provides rights concerning termination, transfer, or non-renewal, and these rights will override any inconsistent provisions in the franchise agreement. California law may also render covenants not to compete unenforceable if they extend beyond the termination of the agreement. Additionally, California Corporations Code requires the franchisor to provide a disclosure document before any material modification to an existing franchise agreement.
Similarly, in Illinois, the Illinois Franchise Disclosure Act governs franchises, and its terms will control if there are inconsistencies with the disclosure document. The Act voids any provision designating jurisdiction and venue outside of Illinois, although arbitration outside the state is permitted. The Act also affects termination and nonrenewal rights and voids any attempt to waive compliance with Illinois law. Furthermore, the payment of initial fees may be deferred until Cr3 American Exteriors has met its obligations and the franchisee has commenced business due to the franchisor's financial condition, as required by the Illinois Attorney General. In Washington, the franchise agreement is subject to state law, particularly regarding the site of arbitration, mediation, or litigation, releases or waivers of rights, statutes of limitations, jury trial waivers, transfer fees, termination rights, and certain buy-back provisions.
Prospective franchisees should be aware that the standard Cr3 American Exteriors franchise agreement is modified by state-specific addenda in certain states, and these modifications are legally binding. Franchisees are encouraged to consult with legal counsel to understand how these state laws affect their rights and obligations under the franchise agreement. This is particularly important in states like California, Illinois, and Washington, where specific statutes can override or modify the standard terms of the agreement.