What is the Itan franchisee's responsibility regarding the proposed agreements relating to the sale of the franchise in California?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
ly effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such persons from membership in such association or exchange.
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- The earnings claims figures do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchise business. Franchisees or former franchisees listed in the Disclosure Document may be one source of this information.
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- 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.
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- The Franchise Agreement and Supplemental Agreements require application of the laws of California. This provision may not be enforceable under California law.
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- 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.).
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- 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.
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- 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.
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- California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination, transfer, or non-renewal of a franchise.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, prospective franchisees in California are encouraged to seek independent legal counsel to understand how California and federal laws apply to the franchise agreement and any supplemental agreements, especially concerning restrictions on venue outside of California. This is particularly relevant to provisions about termination, transfer, or non-renewal of the franchise. The FDD highlights that if any part of the Franchise Agreement or Supplemental Agreements clashes with the California Franchise Investment Law, the state law will take precedence.
Furthermore, the document states that franchisees must sign a general release of claims when renewing or transferring their franchise. However, California law voids any waiver of rights under the Franchise Investment Law or the Franchise Relations Act. This means that while Itan requires a general release, certain rights under California law cannot be waived by the franchisee.
In the event of a sale of an Itan franchise, the franchisee is required to release Itan from any and all claims related to the franchise agreement. However, California franchisees are releasing all existing claims, whether known or unknown, against Itan. This includes waiving California Civil Code Section 1542, which states that a general release does not apply to claims the creditor doesn't know or suspect to exist, which if known, would have materially affected the settlement with the debtor. This waiver only applies to California franchisees.