What is the Itan franchisee's responsibility regarding legal counsel in California?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
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 or Supplemental Agreement restricting venue to a forum outside the State of California.
The Franchise Agreement and Supplemental Agreements require application of the laws of California.
This provision may not be enforceable under California law.
The Franchise Agreement and Supplemental Agreements may provide for termination upon bankruptcy.
Any such provision may not be enforceable under federal bankruptcy law (11 U.S.C.A.
Sec. 101 et seq.).
The Franchise Agreement and Supplemental Agreements may contain a covenant not to compete which extends beyond the termination of the franchise.
This provision may not be enforceable under California law.
Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
Any such provisions contained in the Franchise Agreement or Supplemental Agreements may not be enforceable.
California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination, transfer, or non-renewal of a franchise.
If the Franchise Agreement or Supplemental Agreements contain a provision that is inconsistent with the California Franchise Investment Law, the California Franchise Investment Law will control.
You must sign a general release of claims if you renew or transfer your Franchise.
California Corporations Code Section 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code Sections 31000 through 31516).
Business and Professions Code Section 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code Sections 20000 through 20043).
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, prospective franchisees are encouraged to seek independent legal counsel to understand the implications of California and federal laws on the franchise agreement. This includes 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 might restrict venue to a forum outside of California.
This recommendation highlights the importance of understanding the legal framework governing the franchise relationship, as the Franchise Agreement and Supplemental Agreements require application of California laws. However, the FDD notes that certain provisions, such as those related to termination upon bankruptcy or covenants not to compete extending beyond the franchise term, may not be enforceable under California or federal law. Additionally, under California Civil Code Section 1671, certain liquidated damages clauses might be unenforceable.
Itan franchisees should also be aware of the rights provided to them under California Business and Professions Code Sections 20000 through 20043 regarding termination, transfer, or non-renewal of a franchise. The FDD explicitly states that if any provision in the Franchise Agreement or Supplemental Agreements is inconsistent with the California Franchise Investment Law, the California Franchise Investment Law will take precedence. Furthermore, any requirement to sign a general release of claims upon renewal or transfer of the franchise is subject to California Corporations Code Section 31512 and Business and Professions Code Section 20010, which void waivers of rights under the Franchise Investment Law and Franchise Relations Act, respectively.
Given these complexities, Itan emphasizes the need for franchisees to be well-informed about their rights and obligations under both the franchise agreement and applicable laws. Consulting with legal counsel is crucial to navigate these potential conflicts and ensure full compliance and protection of their interests.