What are prospective Belocal franchisees encouraged to do regarding California and federal laws related to venue restrictions in the Franchise Agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, prospective franchisees are encouraged to seek independent legal counsel to understand how California and federal laws might affect any parts of the Franchise Agreement that limit where legal disputes can be resolved if they are considering investing in a Belocal franchise. Specifically, the FDD mentions Business and Professions Code section 20040.5, Code of Civil Procedure section 1281, and the Federal Arbitration Act as potentially relevant laws.
This recommendation highlights the importance of due diligence before entering into a franchise agreement. Franchise agreements often include clauses that dictate the location (venue) for resolving disputes, which may not always be the franchisee's home state. In Belocal's case, the agreement requires binding arbitration that will occur in the city in which Belocal maintains its principal business office at the time of the arbitration. The costs will initially be paid equally by both sides, and the arbitrator must award the prevailing party the reasonable costs and fees, including attorneys' fees, incurred in the arbitration.
By consulting with legal counsel, prospective Belocal franchisees can gain a clearer understanding of their rights and obligations under the agreement, especially concerning dispute resolution. This can help them make informed decisions and avoid potential legal challenges down the road. It is a common practice in franchising for franchisors to include clauses about governing law and venue, but the enforceability of these clauses can vary depending on state and federal laws, making legal advice crucial.