Is Devon Creek's right to terminate the franchise agreement with cause subject to state law?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
| f. | Termination by franchisor with cause | Article 17 | We may terminate only if you default, subject to state law. The Franchise Agreement describes defaults throughout. Please read it carefully. | | q. | Non-competition covenants during the term of the franchise | Section 19.5.1 | You may not: divert, or attempt to divert, customers or referral sources of any Devon Creek outlet (including yours) to any competitor, participate in any capacity, including, but not limited to as an owner, investor, officer, director, employee, or agent, in any competing business; do any act that could damage the goodwill of the Marks or System, or disrupt or jeopardize our business or that of our franchisees. Subject to state law. | | r. | Non-competition covenants after the franchise is terminated or expires | Section 19.5.2 | For twenty four (24) months after the termination of the Franchise Agreement, you may not: divert, or attempt to divert, customers or referral sources of any Devon Creek outlet (including yours) to any competitor, participate in any capacity, including, but not limited to as an owner, investor, officer, director, employee or agent, in any competing business within ten (25) miles of your former Devon Creek Territory or any other Devon Creek office location; do any act that could damage the goodwill of the Marks or System, or disrupt or jeopardize our business or that of our franchisees. Subject to state law. | | u. | Dispute resolution by arbitration or mediation | Sections 20.1 and 20.2 | At our option, claims that are not resolved internally may be submitted to non-binding mediation at our headquarters, subject to state law. | | v. | Choice of forum | Section 20.3 | Litigation takes place in North Carolina, subject to applicable state law. | | w. | Choice of law | Section 20.3 | North Carolina law applies, subject to applicable state law. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 37–42)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, Devon Creek can terminate a franchise agreement with cause, but this right is subject to state law. Specifically, Item 17 details that Devon Creek may terminate the franchise agreement if the franchisee defaults, but this is 'subject to state law.'
This means that state laws may impose additional requirements or limitations on Devon Creek's ability to terminate the agreement, even if the franchisee has committed a default as defined in the franchise agreement. These state laws can vary significantly, potentially affecting the enforceability of certain termination clauses or requiring Devon Creek to provide additional notices or opportunities to cure the default.
Furthermore, several other aspects of the franchise relationship are also noted as being subject to applicable state law, including dispute resolution, choice of forum, choice of law, and non-competition covenants. Prospective franchisees should consult with a legal professional to understand how these state laws may impact their rights and obligations under the franchise agreement.