Does the North Dakota Securities Commissioner consider it unfair for Bambu franchise agreements to require arbitration of disputes at a location remote from the franchisee's business?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
NORTH DAKOTA RIDER TO FRANCHISE AGREEMENT
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- The North Dakota Securities Commissioner has held the following to be unfair, unjust or inequitable to North Dakota franchisees:
- A. Restrictive Covenants: Franchise Disclosure Documents which disclose the existence of covenants restricting competition contrary to Section 9-08-06, N.D.C.C., without further disclosing that such covenants will be subject to this statute.
- B. Situs of Arbitration Proceedings: Franchise agreements providing that the parties must agree to the arbitration of disputes at a location that is remote from the site of the franchisee's business.
- C. Restrictions on Forum: Requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota.
- D. Liquidated Damages and Termination Penalties: Requiring North Dakota franchisees to consent to liquidated damages or termination penalties.
- E. Applicable Laws: Franchise agreements which specify that they are to be governed by the laws of a state other than North Dakota.
- F. Waiver of Trial by Jury: Requiring North Dakota franchisees to consent to the waiver of a trial by jury.
- G. Waiver of Exemplary & Punitive Damages: Requiring North Dakota franchisees to consent to a waiver of exemplary and punitive damages.
- H. General Release: Franchise agreements that require the franchisee to sign a general release upon renewal of the franchise agreement.
- I. Limitation of Claims: Franchise agreements that require the franchisee to consent to a limitation of claims. The statute of limitations under North Dakota law applies.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, the North Dakota Securities Commissioner considers it unfair, unjust, or inequitable for Bambu franchise agreements to require franchisees to arbitrate disputes at a location remote from the franchisee's business site. This position is explicitly stated in the North Dakota Rider to the Franchise Agreement.
This determination by the North Dakota Securities Commissioner means that Bambu franchisees in North Dakota may have the right to arbitrate disputes closer to their business location. This can significantly reduce the costs and logistical burdens associated with arbitration, as franchisees would not need to travel long distances or incur substantial travel expenses to resolve disputes with Bambu. It also suggests that North Dakota franchisees may have stronger legal protections compared to franchisees in other states regarding the location of arbitration proceedings.
However, the FDD also indicates that Bambu does not necessarily agree with this position. The document includes language stating that Bambu believes all provisions of the Franchise Agreement, including arbitration provisions, are fully enforceable and that Bambu intends to rely on federal pre-emption under the Federal Arbitration Act. This suggests a potential conflict, and it is unclear how this issue would be resolved in practice. A prospective franchisee should seek legal counsel to understand their rights and obligations under the Franchise Agreement, particularly concerning dispute resolution in North Dakota.
Prospective franchisees in North Dakota should be aware of this potential conflict and understand that while the North Dakota Securities Commissioner has deemed remote arbitration unfair, Bambu intends to enforce the arbitration provisions as written in the Franchise Agreement. It is advisable to consult with a legal professional to fully understand the implications of this discrepancy and to protect their interests.