In Minnesota, can Stretch Zone require the franchisee to consent to liquidated damages?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Minnesota Statutes, Section 80C.21 and Minnesota Rules 2860.4400(J) prohibit the Franchisor from requiring litigation to be conducted outside Minnesota, requiring waiver of a jury trial, or requiring the franchisee to consent to liquidated damages, termination penalties or judgment notes.
In addition, nothing in the Franchise Disclosure Document or agreement(s) can abrogate or reduce (1) any of the Franchisee's rights as provided for in Minnesota Statutes, Chapter 80C or (2) the Franchisee's rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, Minnesota law provides specific protections to franchisees and developers. Specifically, Minnesota Statutes, Section 80C.21 and Minnesota Rules 2860.4400(J) explicitly prohibit Stretch Zone from requiring franchisees or developers to consent to liquidated damages. This protection is in place to ensure fairness in the contractual relationship between the franchisor and its franchisees within the state.
This means that any clause in the franchise agreement that mandates a franchisee to agree to liquidated damages is unenforceable in Minnesota. Liquidated damages are predetermined amounts specified in a contract that one party will pay to the other in the event of a breach. Minnesota law aims to prevent Stretch Zone from imposing potentially unfair or excessive penalties on franchisees through such clauses.
Furthermore, the FDD states that nothing in the Franchise Disclosure Document or agreements can reduce any of the franchisee's rights as provided for in Minnesota Statutes, Chapter 80C, or their rights to any procedure, forum, or remedies provided by Minnesota law. This reinforces the state's commitment to protecting franchisees and ensuring they have full access to legal recourse and rights within the state's jurisdiction. Therefore, prospective Stretch Zone franchisees in Minnesota can be assured that they cannot be compelled to consent to liquidated damages, and their legal rights are safeguarded by state law.