Under California law, what should prospective Anago franchisees consult regarding venue restrictions in the Subfranchise Rights Agreement?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
The Subfranchise Rights Agreement requires binding arbitration. The arbitration will be conducted at a suitable location chosen by the arbitrator which is within a 50 mile radius of our then current principal place of business (currently Pompano Beach, Florida) with the costs being borne as provided in the Subfranchise Rights Agreement. 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 the Subfranchise Rights Agreement restricting venue to a forum outside the State of California.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, prospective franchisees in California should seek private legal counsel to understand how California and federal laws might affect venue restrictions in the Subfranchise Rights Agreement. Specifically, they should consider Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act. These laws could impact provisions that limit the venue to a location outside of California.
The Subfranchise Rights Agreement mandates binding arbitration at a location selected by the arbitrator within a 50-mile radius of Anago's principal business location, which is currently in Pompano Beach, Florida. The costs associated with arbitration will be allocated as specified in the Subfranchise Rights Agreement. Given that the agreement stipulates Florida law, California franchisees need to be aware that this may not be enforceable under California law.
This recommendation highlights the importance of franchisees understanding their rights under both the franchise agreement and applicable state and federal laws. Consulting with legal counsel can help ensure that franchisees are fully informed about potential conflicts and limitations within the agreement, especially concerning dispute resolution and venue selection.