How does the prohibition against unilateral termination without good cause affect the Itan Franchise Agreement or Supplemental Agreement in Indiana?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
In recognition of the requirements of the Indiana Franchise Disclosure Law, IC 23-2-2-2.5, the Franchise Agreement and Supplemental Agreements are amended as follows:
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- The laws of the State of Indiana supersede any provisions of the Disclosure Document, Franchise Agreement and Supplemental Agreements if such provisions are in conflict with Indiana law.
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- The Franchise Agreement and Supplemental Agreements are amended to provide that such agreements will be construed in accordance with the laws of the State of Indiana.
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- Any provision in the Franchise Agreement which designates jurisdiction or venue, or requires the franchisee to agree to jurisdiction or venue, in a forum outside of Indiana, is deleted from any Franchise Agreement and Supplemental Agreement issued in the State of Indiana.
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- The prohibition by Indiana Code § 23-2-2.7-1(7) against unilateral termination of the franchise without good cause or in bad faith, good cause being defined therein as material breach of the Franchise Agreement or Supplemental Agreement (as applicable), shall supersede the provisions of the Franchise Agreement or Supplemental Agreement (as applicable) in the State of Indiana to the extent they may be inconsistent with such prohibition.
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- The covenant not to compete that applies after the expiration or termination of the Franchise Agreement is hereby modified to the extent necessary to comply with Indiana Code 23-2-2.7-1(9).
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- Liquidated damages and termination penalties are prohibited by law in the State of Indiana and, therefore, the Disclosure Document, the Franchise Agreement and Supplemental Agreements are amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such termination, and in addition to the obligations of the franchisee as otherwise provided, or in the event of termination or cancellation of the Franchise Agreement under any of the other provisions therein, the franchisee nevertheless shall be, continue and remain liable to franchisor for any and all damages which franchisor has sustained or may sustain by reason of such default or defaults and the breach of the Franchise Agreement on the part of the franchisee for the unexpired Term of the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Indiana law impacts the termination of franchise agreements. Specifically, Indiana Code § 23-2-2.7-1(7) prohibits Itan from unilaterally terminating a franchise agreement without good cause or in bad faith. The FDD defines "good cause" as a material breach of the Franchise Agreement or Supplemental Agreement by the franchisee. This Indiana law supersedes any conflicting provisions in Itan's standard Franchise Agreement or Supplemental Agreement within the state.
For a prospective Itan franchisee in Indiana, this means that Itan cannot terminate the franchise agreement without demonstrating a material breach of the agreement. This provides a level of protection to the franchisee, ensuring that the franchise cannot be terminated arbitrarily. The franchisee must fail to comply with a lawful provision of the franchise agreement and fail to cure such failure after receiving written notice and a reasonable opportunity to cure, which need not be more than 30 days.
Furthermore, Indiana law stipulates several provisions that protect franchisees. These include preventing franchisors from requiring franchisees to waive rights and protections under the Indiana Deceptive Franchise Practices Law. It also addresses issues such as releases, assignments, venue, covenants not to compete, liquidated damages, and transfer of ownership, ensuring compliance with Indiana law. These stipulations collectively aim to create a fairer balance between the franchisor and franchisee within the state of Indiana.