Peaberry Coffee, Inc., owned and operated about twenty company stores in the Denver area. The company began a franchise program and pre-pared a disclosure document as required by the Federal Trade Commission (FTC). Peaberry sold ten franchises, and each franchisee received a disclosure document. Later, when the franchises did not do well, the franchisees sued Peaberry, claiming that its FTC disclosure document had been fraudulent. Specifically, the franchisees claimed that Peaberry had not disclosed that most of the company stores were unprofitable and that its parent company had suffered significant financial losses over the years. In addition, Peaberry had included in the franchisees’ information packets, an article from the Denver Business Journal in which an executive had said that Peaberry was profit-able. The FTC disclosure document had also contained an exculpatory clause, which said the buyers should not rely on any material that was not in the franchise contract itself. Can a franchisor disclaim the relevance of the information it provides to franchisees? Why or why not?
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