In the event of a dispute arising from the section regarding renewal, termination, transfer, and dispute resolution, does the arbitrator have the authority to determine if any part of that section is unenforceable for a Bft franchise?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
ing under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
The Multi-Unit Agreement and Franchise Agreement provide that disputes are resolved through arbitration. A Maryland franchise regulation states that it is an unfair or deceptive practice to require a franchisee to waive its right to file a lawsuit in Maryland claiming a vio
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 57–66)
What This Means (2025 FDD)
Based on the 2025 FDD, the arbitrator's authority to determine the enforceability of provisions within the renewal, termination, transfer, and dispute resolution section of the Bft franchise agreement depends on the specific state and the interplay with the Federal Arbitration Act. For instance, in North Dakota, certain provisions like those concerning covenants not to compete or waivers of punitive damages might not be fully enforceable under the North Dakota Franchise Investment Law, and arbitration will be held at a mutually agreed site, potentially impacting the arbitrator's scope. Similarly, in Washington, provisions that unreasonably restrict the statute of limitations for claims or rights under the Washington Franchise Investment Protection Act may not be enforceable.
Specifically, the FDD states that in Washington, certain provisions that conflict with limitations on noncompetition covenants or that restrict a franchisee from soliciting or hiring employees are void and unenforceable. This suggests that an arbitrator in Washington would need to consider these state-specific limitations when assessing the enforceability of any part of the agreement.
In Maryland, there's a regulation stating that requiring a franchisee to waive their right to file a lawsuit in Maryland for violations of the Maryland Franchise Registration and Disclosure Law is an unfair practice. While the enforceability of this in light of the Federal Arbitration Act is disputed, it introduces another layer of complexity that an arbitrator would need to navigate. Therefore, while the Federal Arbitration Act generally governs arbitration matters, state laws can impose limitations on the enforceability of certain franchise agreement terms, potentially influencing the arbitrator's decisions regarding enforceability.