What you need to know: Hidden Releases
June 15, 2014Franchisors tend to be overly wary of franchisees bringing lawsuits against them. As a result, franchisors frequently try to make franchisees sign “general releases” of any claims whenever they can. A general release is just what it sounds like: It is a document in which the franchisee releases the franchisor from any claims of wrongdoing that it may have. Releases typically are effective to release any claim of wrongdoing, whether known or unknown that exists at the time that the release is signed.
What is important for franchisees to understand is that franchisors may hide these releases in other documents. Typically, if a franchisee has signed up for a franchise as an individual and, after signing the agreement, transfers it to a corporation that it owns, the franchisor will sometimes include a paragraph that contains a general release in the transfer language. Buried inside a document intended for another purpose, the franchisee does not realize that it has discharged the franchisor for any wrongdoing.
If you are a franchisee, you should look for language of a release in any document that the franchisor has asked you to sign. And, since franchisors frequently ask for these releases on a frequent basis, you should look for them whenever you are presented with a franchise or a document.