Does the Bang Cookies franchise agreement require binding arbitration?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Article 18.G. of the Franchise Agreement, and if Franchisee executes a Development Agreement, Article 7.6 of the Development Agreement, under the heading "Choice of Law, Non-Binding Mediation, Binding Arbitration, and Consent to Jurisdiction", shall be amended by the addition of the following statement added after the end of the last sentence of Article 18.G. of the Franchise Agreement and Article 7.6 of the Development Agreement:
Illinois Addendum: Illinois law governs the agreements between the parties to this franchise.
FRANCHISOR AND FRANCHISEE AGREE THAT ALL PROCEEDINGS AND/OR LEGAL ACTIONS ARISING OUT OF OR RELATED TO THIS AGREEMENT AND/OR THE OFFER AND SALE OF THE BANG COOKIES SHOP FRANCHISE FROM FRANCHISOR TO FRANCHISEE, WILL BE CONDUCTED ON AN INDIVIDUAL BASIS AND NOT A CLASS-WIDE BASIS, AND, THAT ANY PROCEEDING BETWEEN FRANCHISEE, FRANCHISEE'S OWNERS, SPOUSES AND/OR GUARANTORS AND FRANCHISOR AND/OR FRANCHISOR'S AFFILIATES, OFFICERS, DIRECTORS AND/OR EMPLOYEES MAY NOT BE CONSOLIDATED WITH ANY OTHER PROCEEDING BETWEEN FRANCHISOR AND ANY OTHER THIRD PARTY.
Franchisee agrees that in the event that an arbitrator in any arbitration proceeding and/or, a court of competent jurisdiction shall issue an award, judgment, decision and/or order finding, holding and/or
declaring Franchisee's breach of this Agreement than Franchisor shall also be entitled to the recovery of all reasonable attorney fees, costs and expenses associated with and/or related to such arbitration and/or litigation. Said fees, costs and expenses shall include, but not be limited to, attorney fees, arbitration fees, arbitrator fees, deposition expenses, expert witness fees and filing fees.
Section 4 of the Illinois Franchise Disclosure Act Provides that any provision in a Franchise Agreement that designates jurisdiction or venue outside the State of Illinois is void. However, a Franchise Agreement may provide for arbitration in a venue outside Illinois.
In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in the State of Washington, or in a place mutually agreed upon at the time of the arbitration or as determined by the arbitrator.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, the franchise agreement includes provisions for binding arbitration. Specifically, Article 18.G of the Franchise Agreement (and Article 7.6 of the Development Agreement, if applicable) addresses "Choice of Law, Non-Binding Mediation, Binding Arbitration, and Consent to Jurisdiction." This indicates that disputes may be subject to binding arbitration. Additionally, the agreement stipulates that all proceedings will be conducted on an individual basis, preventing class-action lawsuits.
For franchisees in Illinois, the Illinois Franchise Disclosure Act states that while the franchise agreement can specify arbitration in a venue outside of Illinois, any provision designating jurisdiction or venue outside the state is void. This suggests that while Bang Cookies may prefer arbitration, Illinois franchisees have some protection regarding where the arbitration takes place. Similarly, for franchisees in Washington, any arbitration involving a franchise purchased in Washington must occur within the state or in a location mutually agreed upon by both parties or determined by the arbitrator.
Furthermore, the Bang Cookies franchise agreement emphasizes that franchisees waive their right to participate in class-action lawsuits, ensuring that any legal actions are pursued individually. The agreement also specifies that if an arbitrator or court finds the franchisee in breach of the agreement, Bang Cookies is entitled to recover all reasonable attorney fees, costs, and expenses associated with the arbitration or litigation, including arbitration fees, arbitrator fees, deposition expenses, expert witness fees, and filing fees. This could potentially increase the financial risk for franchisees involved in legal disputes with Bang Cookies.
Prospective franchisees should carefully review Article 18.G (or Article 7.6 of the Development Agreement) and related clauses in the Franchise Agreement to fully understand the scope and implications of the binding arbitration provision, including the costs, location, and limitations on legal recourse. Franchisees should also be aware of the specific protections afforded to them under state laws like the Illinois Franchise Disclosure Act and the Washington State Franchise Investment Protection Act, which may modify or supersede certain terms of the franchise agreement.