Does the Gokhale Method agreement disclaim the representations in the Franchise Disclosure Document?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
ADDENDUM TO THE GOKHALE METHOD INSTITUTE, INC. FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF CALIFORNIA
REGISTRATION OF THIS FRANCHISE DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER OF THE DEPARTMENT OF FINANCIAL PROTECTION AND INNOVATION.
The California Department of Financial Protection and Innovation requires that certain provisions contained in franchise documents be amended to be consistent with California law, including the California Franchise Investment Law, CAL.
CORP.
CODE Section 3100 et seq., and the California Franchise Relations Act, CAL.
BUS.
PROF.
CODE Section 20000 et seq.
To the extent that the disclosure document and/or Franchise Agreement contain provisions that are inconsistent with the following, such provisions are hereby amended:
- A.
Item 17 of the disclosure document is supplemented by the following language:
- a.
California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee 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.
- b.
The Franchise Agreement provides for termination upon bankruptcy.
This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A.
Sec. 101 et seq.).
- c.
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.
- d.
The Franchise Agreement contains a liquidated damages clause.
Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
- e.
The Franchise Agreement requires the parties to try to settle disputes in mediation administered by the American Arbitration Association ("AAA") under its Commercial Mediation Procedures.
If not resolved by mediation, the Franchise Agreement requires binding arbitration.
The arbitration will occur at Palo Alto, California with the costs being borne by the parties equally.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
The 2024 Franchise Disclosure Document for Gokhale Method includes disclaimers and amendments specific to California law. These stipulations address potential inconsistencies between the franchise agreement and California regulations, particularly concerning termination, transfer, or non-renewal rights as provided under California Business and Professions Code Sections 20000 through 20043. The document explicitly states that if any provision in the franchise agreement clashes with California law, the law will take precedence. This ensures that franchisees operating in California are protected by state-specific legal standards, regardless of the standard terms outlined in the franchise agreement.
Further, the addendum addresses specific clauses often found in franchise agreements that may not be enforceable in California. These include termination upon bankruptcy, covenants not to compete extending beyond the franchise term, and liquidated damages clauses. California law may restrict the enforcement of these provisions, and the addendum serves as a notice to potential franchisees about these limitations. This is particularly important because standard franchise agreements are often drafted to apply broadly across different states, and without such addenda, franchisees might misunderstand their rights and obligations within the specific legal context of California.
Additionally, the Gokhale Method franchise agreement requires disputes to be settled through mediation administered by the American Arbitration Association (AAA), followed by binding arbitration in Palo Alto, California, if mediation fails. The costs of arbitration are to be shared equally between the parties. This stipulation clarifies the dispute resolution process, informing franchisees of the expected procedures and location for resolving potential conflicts. While arbitration is a common method for resolving franchise disputes, franchisees should be aware of the costs and location implications, especially if they are located outside of California. The inclusion of these specific amendments and disclaimers demonstrates Gokhale Method's effort to comply with California law and inform potential franchisees of their rights and obligations within the state.