What is the potential issue with the Aerus franchise agreement requiring 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. 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.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, a potential issue arises for franchisees located outside of Texas due to the franchise agreement mandating that all arbitration proceedings occur in Dallas, Texas. This requirement could create a financial burden for franchisees who must travel to Dallas for arbitration, incurring travel, accommodation, and legal fees.
For Illinois franchisees, the Illinois Addendum specifies that while the franchise agreement may provide for arbitration outside of Illinois, the forum for all court litigation shall be Cook County, Illinois, and the forum for all arbitration proceedings shall be in Dallas, Texas. This means that even though Illinois law might allow for arbitration outside the state, Aerus's agreement specifically designates Dallas as the location.
The agreement also stipulates that any such action shall be conducted on an individual basis, preventing franchisees from participating in consolidated, common, or class actions. This waiver of class action rights means each franchisee must pursue their claims independently, potentially increasing their individual costs and reducing their bargaining power against Aerus. The arbitrator is selected by Aerus, which could raise concerns about impartiality, although the prevailing party is entitled to recover reasonable attorney's fees, costs, and expenses incurred during arbitration.
Overall, the arbitration clause in the Aerus franchise agreement, particularly the requirement for arbitration to take place in Dallas, Texas, could pose significant logistical and financial challenges for franchisees, especially those located far from Texas. The waiver of class action rights further limits the options available to franchisees in resolving disputes with Aerus.