What California laws are recognized in the addendum to the Monicals Pizza Franchise Agreement?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
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- Section 31125 of the California Corporations Code requires us to give you a Disclosure Document, in a form containing the information that the commissioner may by rule or order require, before a solicitation of a proposed material modification of an existing franchise.
You must sign a general release if you renew or transfer your franchise. California Corporations Code §31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code §§31000 through 31516). Business and Professions Code §20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code §§20000 through 20043).
Neither the franchisor, any person or franchise broker in Item 2 of the Disclosure Document Disclosure Document is subject to any currently 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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- ITEM 17 of the Disclosure Document Disclosure Document is amended to add the following:
- The California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination or non-renewal of a franchise. If the Franchise Agreement or Area Development Agreement contains a provision that is inconsistent with the law, the law will control.
- 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.).
- The Franchise Agreement contains a covenant not to compete that extends beyond the term of the agreement. This provision might not be enforceable under California law.
- The Franchise Agreement and Area Development Agreement require litigation to be conducted in a court located outside of the State of California. This provision might not be enforceable for any cause of action arising under California law.
- The Franchise Agreement and Area Development Agreement require application of the laws of a state other than the State of California. This provision might not be enforceable under California law.
- The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
- The Franchise Agreement and Area Development Agreement require binding arbitration. The arbitration will occur at the forum indicated in ITEM 17 with the costs being borne by the non-prevailing party.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to the 2025 Monicals Pizza Franchise Disclosure Document, the addendum for California recognizes several aspects of California law. Specifically, it acknowledges the California Franchise Investment Law, requiring that a copy of all proposed agreements relating to the sale of the franchise be delivered with the disclosure document. It also references Section 31125 of the California Corporations Code, which mandates that Monicals Pizza provide a disclosure document before soliciting a proposed material modification of an existing franchise.
Furthermore, the addendum addresses franchisee rights, stating that California Corporations Code §31512 voids any waiver of rights under the Franchise Investment Law (California Corporations Code §§31000 through 31516). Similarly, Business and Professions Code §20010 voids any waiver of rights under the Franchise Relations Act (Business and Professions Code §§20000 through 20043). These provisions ensure that franchisees in California retain their legal protections and cannot inadvertently relinquish them through waivers.
The addendum also amends the Development Agreement for Monicals Pizza in recognition of the California Franchise Investment Law, Cal. Corp. Code §§31000-3516, and the California Franchise Relations Act, Cal. Bus. And Prof. Code §§20000-20043. It clarifies that if any provisions in Section 8 of the Area Development Agreement concerning termination and non-renewal are inconsistent with California Business and Professions Code Sections 2000 through 20043, California law will take precedence. Additionally, it notes that the covenant not to compete in Section 9.4 of the Area Development Agreement may not be enforceable under California law, as well as provisions related to venue and choice of law.
For a prospective Monicals Pizza franchisee in California, this means that certain standard clauses in the franchise agreement, particularly those related to termination, non-compete agreements, and legal jurisdiction, are subject to California law and may be interpreted differently than in other states. The addendum serves to protect the franchisee's rights under California law, ensuring that they are not overridden by conflicting terms in the standard franchise agreement. Franchisees should consult with legal counsel to fully understand their rights and obligations under California law.