Are there any exceptions to the binding arbitration requirement in the Annex Brands franchise agreement?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
LOSURE DOCUMENT
Item 17 of this disclosure document is modified to include the following paragraphs:
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- The California Business and Professions Code Sections 20000 through 20043 provide certain rights to you, including (i) limitations on our ability to terminate a franchise except for good cause; (ii) restrictions on our ability to deny renewal of franchise; (iii) circumstances under which we may be required to purchase certain inventory of franchisee when a franchise is terminated or not renewed in violation of the statute; and (iv) provisions relating to arbitration. To the extent that the provisions of the franchise agreement are inconsistent with the terms of the Act, the terms of the Act will control in California.
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- Section 3115 of the California Corporations Code requires us to give you a disclosure document, in a form and containing all information the Commissioner by rule or order requires, before solicitation of a proposed material modification of an existing franchise.
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- The franchise agreement requires binding arbitration, except for matters involving trademarks, real estate or injunctive relief, at a location of the American Arbitration Association closest to our corporate offices, with the costs being borne equally by the parties. You 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.
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- The covenant not to compete extends beyond the termination of the franchise. This provision may not be enforceable under California law.
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- You must sign a general release if you renew or transfer your franchise, or to receive a refund of the initial franchise fee under the circumstances outlined in Item 5. California Corporations Code 31512 voids a waiver of your rights under the franchise investment law (California Corporations Code 31000 through 31516). California Business and Professions Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
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- The California Franchise Investment Law requires that a copy of all proposed agreements relating to the sale of the franchise be delivered together with the disclosure document.
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Source: Item 23 — Receipts (FDD pages 110–299)
What This Means (2025 FDD)
According to Annex Brands's 2025 Franchise Disclosure Document, the franchise agreement requires binding arbitration, but there are exceptions for certain matters. Specifically, disputes involving trademarks, real estate, or requests for injunctive relief are not subject to the binding arbitration requirement. This means that Annex Brands franchisees can pursue litigation in court for these specific types of issues, rather than being forced into arbitration. The arbitration location is set at the American Arbitration Association closest to Annex Brands's corporate offices, and the costs are to be shared equally between the parties.
However, the FDD also notes that California and federal laws may impact the enforceability of venue restrictions in the franchise agreement. Prospective franchisees in California are encouraged to seek legal counsel to understand how these laws might apply to the arbitration provisions. Additionally, the California Business and Professions Code provides certain rights to franchisees, including provisions relating to arbitration, and states that if the franchise agreement is inconsistent with the Act, the terms of the Act will control in California.
For franchisees in Washington, the Washington Franchise Investment Protection Act may supersede the franchise agreement in areas of termination and renewal. In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. Furthermore, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchise, or a violation of the Washington Franchise Investment Protection Act, in Washington.
For franchisees in Illinois, any provision in a franchise agreement that designates jurisdiction and venue in a forum outside of the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.