What section of the Aerus Franchise Agreement discusses dispute resolution?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
16.
Governing Law and Dispute Resolution.7 Subject to Company's rights under federal trademark laws, all claims arising out of or relating to this Agreement and/or the parties' relationship will be governed by, and will be interpreted in accordance with, the substantive laws of the State of Texas, excluding choice of law principals and irrespective of any conflict of laws.
The parties agree that any state law or regulation applicable to the offer or sale of franchises or the franchise relationship will not apply unless the jurisdictional provisions are independently met.
Franchisee waives, to the fullest extent permitted by law, the rights and protections provided by any such franchise law or regulation.
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 9 — Franchisee's Obligations (FDD pages 33–34)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, Section 16, titled "Governing Law and Dispute Resolution," outlines how disputes are handled. This section specifies that Texas law governs the agreement, excluding its choice of law principles. It also states that franchise laws or regulations will not apply unless jurisdictional requirements are independently met, and the franchisee waives rights and protections provided by such laws to the extent permitted.
Specifically, any disputes, controversies, or claims arising from the Franchise Agreement or the franchised business will be submitted to binding arbitration, except for actions seeking injunctive relief by Aerus or its affiliates. This arbitration must be conducted on an individual basis, meaning franchisees waive any right to participate in class action lawsuits. The arbitration will take place in Dallas, Texas, following the Commercial Arbitration Rules of the American Arbitration Association, before a single arbitrator selected by Aerus.
The costs of arbitration are initially split equally between Aerus and the franchisee. However, the prevailing party is entitled to recover reasonable attorney's fees, costs, and expenses incurred during the arbitration, along with any interest. Aerus's liability to the franchisee or its principals is capped at the total Standard Allocation collected from the franchised business during the six months preceding the arbitration submission.
This arbitration clause and governing law provision are fairly standard in franchise agreements. However, the franchisee should be aware of the implications of waiving their right to participate in a class action lawsuit and the limitation on Aerus's liability. Prospective franchisees should consult with a legal professional to fully understand the dispute resolution process and its potential impact.