For a Belocal franchise in California, what is the effect of the amendment on the arbitration provision?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
- e. The franchise 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 a franchise agreement restricting venue to a forum outside the State of California.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the amendment for California franchises addresses the enforceability of certain provisions in the franchise agreement, including the arbitration clause. The amendment acknowledges that California law, specifically the California Franchise Investment Law and the California Franchise Relations Act, takes precedence over any conflicting terms in the agreement.
Specifically regarding arbitration, the FDD states that the franchise agreement requires binding arbitration, which will occur in the city where Belocal maintains its principal business office. The costs of arbitration are to be initially paid equally by both parties, and the arbitrator must award the prevailing party their reasonable costs and fees, including attorney's fees. The document encourages prospective franchisees to seek legal counsel to determine the applicability of California and federal laws to any provisions restricting venue to a forum outside of California.
In essence, the amendment ensures that California franchisees are not bound by franchise agreement terms that are inconsistent with California law. While the agreement mandates binding arbitration, the amendment clarifies that California law will govern the interpretation and enforcement of this provision, particularly concerning venue and the franchisee's rights. This provides an added layer of protection for franchisees operating in California, ensuring that their rights under state law are preserved despite the arbitration clause.