Peaberry Coffee, Inc., owned and operated about twenty company s

Peaberry Coffee, Inc., owned and operated about twenty company stores in the Denver area. The company began a franchise program and prepared 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, the trial court found that an article in the Denver Business Journal—in which an executive had said that Peaberry was profitable—was fraudulent. This article had been included in the franchisees’ information packets. The district court dismissed the franchisees’ complaint, noting that the FTC disclosure document had contained an exculpatory clause. This clause said that the buyers should not rely on any material that was not in the franchise contract itself. The franchisees appealed. Can a franchisor disclaim the relevance of the information it provides to franchisees? Why or why not?


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