What specific laws govern Section 17 of the Gokhale Method agreement?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
MENT OF FINANCIAL PROTECTION AND INNOVATION.
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- 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.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, Section 17 of the agreement, which pertains to covenants, is potentially governed by specific California laws if the franchise is operated in California. Specifically, 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.) may apply. These laws provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If any provision in the franchise agreement is inconsistent with these laws, California law will take precedence.
Additionally, certain aspects of Section 17, such as covenants not to compete that extend beyond the termination of the franchise, may not be enforceable under California law. The agreement also mentions liquidated damages clauses, which are subject to California Civil Code Section 1671, potentially rendering certain clauses unenforceable. Furthermore, a provision allowing termination upon bankruptcy may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
For a prospective Gokhale Method franchisee in California, this means that certain terms in the franchise agreement, particularly those related to termination, non-compete clauses, and damages, may be subject to legal limitations or may not be fully enforceable under California or federal law. It is important for franchisees to be aware of these potential discrepancies and to consult with legal counsel to understand their rights and obligations under these laws. This ensures that the franchisee is protected and that the franchise agreement is interpreted in accordance with applicable legal standards.