Does the Auntie Annes franchise agreement allow for class-wide arbitration?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
In recognition of the requirements of the California Franchise Investment Law, California Corporations Code §§ 31000 through 31516, and the California Franchise Relations Act, California Business and Professions Code §§ 20000 through 20043, the Disclosure Document for Auntie Anne's Franchisor SPV LLC in connection with the offer and sale of franchises for use in the State of California is amended to including the following:
1. ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
- A. California Business and Professions Code §§ 20000 through 20043 provide rights to the franchisee concerning termination, transfer or non-renewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
- B. The Franchise Agreement contains provisions requiring application of the laws of Georgia. These provisions may not be enforceable under California law
- C. The Franchise Agreement requires binding arbitration. The arbitration will occur at the offices of our principal place of business (currently Atlanta, Georgia) or another suitable location chosen by us in the city where our headquarters is located, with the prevailing party's costs and expenses to be borne by the other party. 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,
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
The 2024 Auntie Anne's Franchise Disclosure Document does not explicitly state whether class-wide arbitration is permitted. However, the document includes addenda for specific states like California, Washington, Maryland, and Minnesota, addressing how their franchise laws interact with the standard franchise agreement. For instance, the California addendum acknowledges that the franchise agreement requires binding arbitration, potentially in Atlanta, Georgia, and advises prospective franchisees to seek legal counsel regarding the applicability of California and federal laws. The Washington addendum stipulates that for franchises purchased in Washington, the arbitration site will be in Washington or a mutually agreed-upon location. These addenda suggest that arbitration terms can be subject to state-specific regulations.
Item 22 of the Auntie Anne's FDD includes general releases related to assignment or renewal, which contain clauses releasing Auntie Anne's from various claims. However, these releases often include exceptions for rights that cannot be waived under applicable state franchise laws, such as the Maryland Franchise Registration and Disclosure Law. This indicates that the enforceability of certain clauses, including those related to dispute resolution, may vary depending on the franchisee's location and relevant state laws.
Given the lack of a direct statement about class-wide arbitration and the presence of state-specific addenda modifying certain terms, prospective Auntie Anne's franchisees should consult with legal counsel to understand how the arbitration clause in the franchise agreement interacts with the laws of their specific state. It would be prudent to clarify with Auntie Anne's whether the arbitration clause permits or prohibits class-wide arbitration, considering the potential impact of state laws on the enforceability of such a clause.