What are the potential implications of the Aerus franchise agreement requiring binding arbitration in Dallas, Texas?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as may be otherwise provided hereunder in the case of actions for injunctive relief by Company or Company's Affiliates, the parties agree that all disputes, controversies or claims that may directly or indirectly arise among them (including their agents and employees), out of or relating to this Agreement and/or the Franchised Business, shall be submitted to, and determined by, binding arbitration. Any such action shall be conducted on an individual basis, and not as part of a consolidated, common, or class action, and Franchisee waives any and all rights to proceed on a consolidated, common, or class basis. Such arbitration shall be conducted before a single arbitrator in Dallas, Texas pursuant to the Commercial Arbitration Rules then in effect of the American Arbitration Association.
The arbitrator shall be an independent third party arbitrator selected by Company.8 The fees of the arbitration initially shall be paid one-half by Company and one-half by Franchisee; provided, however, that the prevailing party in any such arbitration shall be entitled to recover its reasonable attorneys' fees, costs and expenses (and any interest) incurred in connection with the arbitration.
Company shall not be liable to Franchisee or any of Franchisee's principals for any such dispute, controversy or claim in an aggregate amount greater than the total Standard Allocation collected from the Franchised Business during the six (6) month period immediately preceding the submittal of such dispute, controversy or claim to arbitration.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to the 2025 Aerus Franchise Disclosure Document, any disputes, controversies, or claims arising from the franchise agreement or the franchised business must be submitted to binding arbitration in Dallas, Texas. This means that instead of going to court, disagreements will be resolved by a single arbitrator selected by Aerus, following the Commercial Arbitration Rules of the American Arbitration Association. While the arbitration fees are initially split equally between Aerus and the franchisee, the prevailing party is entitled to recover their reasonable attorneys' fees, costs, and expenses.
This arbitration clause has several potential implications for prospective Aerus franchisees. Firstly, franchisees are waiving their right to a jury trial and agreeing to resolve disputes through arbitration, which is generally faster and less formal than court litigation. However, the arbitrator's decision is binding and typically has limited grounds for appeal. Secondly, the location of the arbitration in Dallas, Texas, could create additional expenses and logistical challenges for franchisees located outside of Texas, as they would need to travel to Dallas for the proceedings.
Furthermore, the Aerus franchise agreement specifies that any arbitration will be conducted on an individual basis, and franchisees waive any rights to participate in a class action against Aerus. This could limit a franchisee's ability to seek redress for grievances that are shared by other franchisees. Finally, the agreement states that Aerus's liability to the franchisee is capped at the total Standard Allocation collected from the franchised business during the six months preceding the arbitration claim. This limitation on liability could significantly impact the potential recovery for a franchisee in a dispute with Aerus.
It is important to note that the Illinois Addendum to the Franchise Agreement stipulates that for Illinois franchises, while court litigation must occur in Cook County, Illinois, arbitration proceedings will still take place in Dallas, Texas. This highlights the importance of carefully reviewing any state-specific addenda to understand how they modify the standard franchise agreement terms.