What California laws are relevant to the Gokhale Method franchise agreement?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
CATIONS**
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- The California Department of Financial Protection and Innovation requires that certain provisions contained in the franchise documents be amended to be consistent with California law, including the California Franchise Investment Law, CAL. CORP. CODE Section 31000 et seq., and the California Franchise Relations Act, CAL. BUS. & PROF. CODE Section 20000 et seq. To the extent that the Agreement contains provisions that are inconsistent with the following, such provisions are hereby amended:
- 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 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. 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
- e.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, several California laws are relevant to the franchise agreement. The California Department of Financial Protection and Innovation mandates that certain provisions within the franchise documents be consistent with California law. These include the California Franchise Investment Law (CAL. CORP. CODE Section 31000 et seq.) and the California Franchise Relations Act (CAL. BUS. & PROF. CODE Section 20000 et seq.).
Specifically, California Business and Professions Code Sections 20000 through 20043 outline the rights of the franchisee regarding termination, transfer, or non-renewal of the franchise. The FDD notes that if any provision in the Franchise Agreement is inconsistent with these laws, the law will take precedence. Additionally, under California Civil Code Section 1671, certain liquidated damages clauses within the franchise agreement may be unenforceable.
The franchise agreement also stipulates that disputes should initially be settled through mediation administered by the American Arbitration Association (AAA), followed by binding arbitration in Palo Alto, California, with costs shared equally between the parties. However, prospective franchisees are encouraged to seek 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, especially concerning provisions that restrict venue to a forum outside California.
Furthermore, California Corporations Code Section 31512 voids any waiver of rights under the Franchise Investment Law (California Corporations Code Sections 31000 through 31516), and Business and Professions Code Section 20010 voids waivers of rights under the Franchise Relations Act (Business and Professions Code Sections 20000 through 20043). The franchise agreement requires application of California laws, except that the laws of the state in which the franchisee is located govern any covenants not to compete.