Where will arbitration occur for a Belocal franchise dispute under the California amendment?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
- a. California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If the Agreement contains a provision that is inconsistent with the law, the law will control.
- b. The Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
- c. The Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
- d. The Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
- e. The Agreement requires application of the laws of Texas. This provision may not be enforceable under California law.
- f. The Agreement requires binding arbitration. The arbitration will occur in the city in which Franchisor maintains its principal business office at the time of the arbitration with the costs being borne by initially be paid equally by the two sides to the arbitration. The arbitrator must award to the prevailing party the reasonable costs and fees, including attorneys' fees, incurred in the arbitration. 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 Agreement restricting venue to a forum outside the State of California.
- g. The following statement is added to the Agreement: No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the standard franchise agreement mandates that arbitration occur in the city where Belocal maintains its principal business office at the time of the arbitration. However, the California amendment modifies this provision, stating that if the standard agreement's provisions are inconsistent with the amendment, the amendment will take precedence. Unfortunately, the excerpt does not specify where arbitration will occur under the California amendment.
Because the FDD excerpt does not provide specific details about arbitration locations under the California amendment, prospective Belocal franchisees should carefully review the full California amendment within the Franchise Agreement.
To gain clarity, a prospective franchisee should ask Belocal about the specific location for arbitration under the California amendment. Understanding this is crucial, as it determines where a franchisee would need to travel and engage legal representation in case of a dispute, which can significantly impact costs and convenience.