Which state's laws govern Section 17 and its enforcement in the Gokhale Method agreement?
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)
According to the 2024 Gokhale Method Franchise Disclosure Document, California law may impact the enforcement of Section 17, specifically for franchisees in California. An addendum to the FDD for California franchisees states that the California Department of Financial Protection and Innovation requires certain provisions in franchise documents to be amended to comply with California law, including the California Franchise Investment Law and the California Franchise Relations Act.
Specifically, Item 17 of the disclosure document, which likely contains the covenants and agreements, is supplemented for California franchisees. This addendum clarifies that California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. The FDD states that if any provision in the franchise agreement is inconsistent with California law, the law will take precedence.
The addendum also addresses specific clauses often found in franchise agreements. For example, a covenant not to compete extending beyond the termination of the franchise may not be enforceable under California law. Similarly, liquidated damages clauses may be unenforceable under California Civil Code Section 1671. Finally, while the agreement may require mediation and arbitration in Palo Alto, California, these provisions are subject to California law. Therefore, while the Gokhale Method agreement may have a general governing law, California franchisees receive specific protections and modifications under California law.