For Gokhale Method franchises in California, what is the purpose of the amendment to the Franchise Agreement?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
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)
According to the 2024 Gokhale Method Franchise Disclosure Document, the amendment to the Franchise Agreement for California franchises is required by the California Department of Financial Protection and Innovation to ensure consistency with California law, specifically the California Franchise Investment Law and the California Franchise Relations Act.
The amendment clarifies several provisions within the franchise documents. It supplements Item 17 of the disclosure document by referencing California Business and Professions Code Sections 20000 through 20043, which outline franchisee rights regarding termination, transfer, or non-renewal. The amendment also addresses specific clauses within the Franchise Agreement, such as those pertaining to termination upon bankruptcy, covenants not to compete extending beyond the franchise term, and liquidated damages clauses, noting that these may not be enforceable under California law or federal bankruptcy law.
Additionally, the amendment addresses dispute resolution, noting that while the Franchise Agreement mandates mediation and binding arbitration in Palo Alto, California, the enforceability of certain aspects may be subject to California law. This amendment ensures that Gokhale Method's franchise operations within California adhere to state regulations, providing franchisees with a clearer understanding of their rights and obligations under the law.