For an Exit franchise, what happens to provisions in the franchise agreement that conflict with the applicable governing law?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. § 1051 et seq.), this Agreement and the relationship between Subfranchisor and Franchisee will be governed by the laws of the state in which the Protected Territory is located. If the Protected Territory contains more than one (1) state, then this Agreement and the relationship between Subfranchisor and Franchisee will be governed by the laws of the state in which Franchisee's principal place of business is located, as indicated on the cover page of this Agreement. The provisions of this Agreement which conflict with or are inconsistent with applicable governing law will be superseded and/or modified by such applicable law only to the extent such provisions are inconsistent. All other provisions of this Agreement will be enforceable as originally made and entered into upon the execution of this Agreement by Franchisee and Subfranchisor.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchise agreement and the relationship between the subfranchisor and franchisee are generally governed by the laws of the state in which the protected territory is located. If the protected territory spans multiple states, the governing law will be that of the state where the franchisee's principal place of business is located.
However, any provisions within the Exit franchise agreement that conflict with the applicable governing law will be superseded or modified by that law, but only to the extent of the inconsistency. This means that if a specific clause in the agreement clashes with a state law, the state law will take precedence, and the clause will be interpreted or altered to comply with the law.
All other provisions of the Exit franchise agreement that do not conflict with the governing law will remain enforceable as originally written. This ensures that the majority of the agreement remains intact and valid, providing a stable framework for the franchise relationship while still adhering to legal requirements. Prospective franchisees should be aware of the specific state laws that may impact their franchise agreement, particularly regarding aspects like non-compete clauses, waivers, and acknowledgments, as these are areas where state laws often have specific regulations that could modify the standard agreement.