Under what condition might the Aerus franchise agreement's binding arbitration provision not be enforceable under California law?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
The franchise agreement requires binding arbitration. The arbitration will occur at Dallas, Texas with the costs being borne by non-prevailing party. This provision may not be enforceable under California law.
Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
The franchise agreement requires application of the laws of the State of Texas. This provision may not be enforceable under California law.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the franchise agreement requires binding arbitration, which will occur in Dallas, Texas, with the non-prevailing party bearing the costs. However, this provision may not be enforceable under California law.
This means that if a dispute arises between Aerus and a franchisee in California, the requirement to arbitrate in Dallas, Texas, and the allocation of costs to the non-prevailing party might not be upheld by California courts. California law may provide the franchisee with the right to litigate the dispute in California, or it may alter the conditions under which arbitration is deemed fair and enforceable.
Prospective Aerus franchisees in California are encouraged to seek legal counsel to understand how California and federal laws, including the Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act, may affect the enforceability of the franchise agreement's venue restrictions. This is particularly important because the agreement also stipulates that Texas law governs the agreement, which itself may not be enforceable under California law.