Can Craters & Freighters contest the validity of a state law that limits its termination rights?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
the Franchise Disclosure Document and Franchise Agreement
STATE SPECIFIC ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT AND FRANCHISE AGREEMENT
| The following modifications are to the Franchise Disclosure Document of Craters & Freighters | |
|---|---|
| Franchise Company and may supersede, to the extent then required by valid applicable state law, certain | |
| portions of the Franchise Agreement dated, 20 | |
| The provisions of this State Law Addendum to the Franchise Disclosure Document and Franchise | |
| Agreement ("State Addendum") apply only to those persons residing or operating Craters & Freighters |
Franchised Businesses in the following states:
CALIFORNIA
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- 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 FRANCHISE DISCLOSURE DOCUMENT.
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- Item 3 is amended by the addition of the following language:
Neither Craters & Freighters Franchise Company nor any person identified in Item 2 of the Franchise Disclosure Document is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Action of 1934, 15 U.S.C.A.78a, et seq., suspending or expelling such persons from membership in such association or exchange.
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- Item 6 is amended to disclose that the highest interest rate allowed in the State of California is 10% per annum.
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- California Business and Professions Code Sections 20000 through 20043 provide rights to the franchise concerning termination, transfer, or non-renewal of a franchise. If the franchise agreement contains a provision that is inconsistent with the law, the law will control.
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- The franchise agreement contains a covenant not to compete, which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
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- The franchise agreement requires arbitration if a dispute is not first resolved by mediation. The arbitration will occur in the city of our then-current headquarters (currently, Golden, Colorado). All parties will be solely responsible for their own legal fees and costs and for their share of the arbitration process fees and costs, with the exception of any dispute of monies owed to Franchisor pursuant to Section 23.3.4 of the Franchise Agreement, in which case all of the costs will be borne by you if Craters & Freighters prevails.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the franchise agreement's provisions regarding termination are subject to state law. In certain states like California, Illinois, Minnesota, Virginia and Washington, specific stipulations exist that may supersede the standard franchise agreement, particularly concerning termination, transfer, and non-renewal rights. These stipulations ensure that franchisees are not forced to waive rights granted to them by state franchise laws.
For example, in Virginia, it is unlawful for Craters & Freighters to cancel a franchise without reasonable cause, as defined by the Virginia Retail Franchising Act. Similarly, Washington's Franchise Investment Protection Act may supersede the franchise agreement in areas of termination and renewal. In Illinois, any provision designating jurisdiction and venue outside of Illinois is void, although arbitration outside the state is permitted. Minnesota law provides franchisees with specific termination and nonrenewal rights, including mandated notice periods.
These state-specific addenda to the Craters & Freighters franchise agreement highlight the importance of franchisees understanding the laws in their particular state. The FDD indicates that Craters & Freighters acknowledges the supremacy of state laws and has amended its agreements to comply with these regulations. This suggests that Craters & Freighters would likely not be successful in contesting the validity of a state law that protects a franchisee's rights, especially concerning termination, as the franchise agreement itself is designed to be subordinate to such laws.