Does state law affect the termination provisions for a Cr3 American Exteriors franchise?
Cr3_American_Exteriors Franchise · 2025 FDDAnswer from 2025 FDD Document
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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).
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 45–48)
What This Means (2025 FDD)
According to Cr3 American Exteriors' 2025 Franchise Disclosure Document, state laws can indeed affect the termination provisions of the franchise agreement. Specifically, the FDD includes a State Specific Addendum that applies 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 instance, in California, the California Business and Professions Code Sections 20000 through 20043 provide rights to franchisees concerning termination, transfer, or non-renewal. The FDD explicitly states that if the Franchise Agreement contains provisions inconsistent with California law, the law will take precedence. Additionally, the franchise agreement provides for termination upon bankruptcy, but this provision may not be enforceable under Federal Bankruptcy Law. The agreement also contains covenants not to compete that extend beyond the termination of the agreements, which may not be enforceable under California law.
Similarly, for franchises governed by the Illinois Franchise Disclosure Act, the terms of the Disclosure Document are superseded by specific terms outlined in the Illinois section of the addendum if inconsistencies exist. Illinois law governs the Franchise Agreement, and any provision designating jurisdiction and venue outside of Illinois is void, although arbitration may occur outside the state. The conditions under which the Franchise Agreement can be terminated and the franchisee's rights upon nonrenewal may be affected by Sections 19 and 20 of the Illinois Franchise Disclosure Act. Any attempt to waive compliance with the Illinois Franchise Disclosure Act or any other Illinois law is void.
These state-specific addenda highlight the importance of franchisees understanding the laws in their specific state and how those laws interact with the franchise agreement. Prospective franchisees should carefully review Exhibit A and consult with legal counsel to understand their rights and obligations under both the franchise agreement and applicable state laws.