USA Law and Practice Contributed by: David B. Ramsey and Michelle Murray-Bertrand, Kaufmann Gildin & Robbins LLP
• where a franchisor’s requirements imposed on franchisees go beyond protecting the brand and get into unnecessary controls over day-to-day business decisions of the franchisee; and • where a franchisor does not consistently enforce its brand standards, allowing franchisees to stray into non-compliance with laws. 8. Choice of Governing Law 8.1 Possibility of a Franchisor Stipulating Non-Local Law Generally, a franchisor may stipulate the laws of its jurisdiction as the governing law of the franchise agreement, but such designation may not be enforce - able in every state. Virtually all state franchise laws contain anti-waiver provisions that expressly restrict franchisors from requiring franchisees to waive the protections afforded by these statutes, and attempt - ing to do so may itself violate state law. Accordingly, a choice-of-law provision generally cannot deprive a franchisee of mandatory protections available under the franchise laws of the state in which the franchise is located or operated. For example, a New York fran - chisee may invoke the rights, remedies and protec - tions available under the New York Franchise Sales Act even if the agreement is governed by California law. The same principle applies to state franchise relation - ship laws, which often apply despite a contractual choice-of-law provision. Their protections, however, generally extend only to franchisees that satisfy the statute’s specific jurisdictional and other coverage requirements. Accordingly, when a franchisee oper - ates units in multiple states, the applicability of each state’s franchise relationship laws must be evaluated separately based on the statute’s scope and require - ments. While choice-of-law provisions remain useful for determining the law governing matters not subject to mandatory franchise protections, franchisors cannot use them to circumvent non-waivable rights or rem - edies under applicable state franchise laws.
To ensure that franchisees receive the protections afforded by applicable state franchise laws, certain state franchise regulators may condition registration or approval of a franchisor’s FDD on the franchisor’s agreement being amended, or supplemented with a state-specific addendum, to expressly acknowledge the applicability of the state’s franchise laws and clar - ify that the contractual choice-of-law provision does not waive or limit any rights or remedies available to the franchisee under applicable state law. 8.2 Local Law Requirements US law generally does not require a franchise agree - ment to be governed generally by the law of the state in which the franchised business is located or oper - ated. As a general matter, the parties may select the law of another jurisdiction to govern their contractual relationship, subject to applicable conflict-of-laws principles and the mandatory protections of any state franchise disclosure, registration or relationship laws that apply to the franchise. However, there are two important caveats to the above. First, a contractual choice-of-law provision may not be used to waive, limit or avoid non-waivable statu- tory rights, remedies or obligations under applicable state franchise laws. Second, certain states expressly restrict or condition the use of out-of-state or foreign governing-law provisions in franchise agreements, particularly where the effect would be to deprive a franchisee of protections afforded by the law or public policy of the state in which the franchise is operated. 8.3 Mandatory Content US law does not prescribe a uniform set of mandatory provisions for inclusion in all franchise agreements. Rather, mandatory contractual requirements are gen - erally determined on a state-by-state basis and may vary by jurisdiction and, in some cases, franchise type. State franchise relationship laws may impose substantive rights, protections and obligations that apply by operation of law, regardless of the franchise agreement’s terms. Although such laws generally do not require these statutory rights and obligations to be expressly memorialised in the agreement, conflict - ing contractual provisions may be unenforceable and superseded by applicable law. Franchisors therefore generally retain broad drafting discretion, subject to
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