Does the Bombs Away franchise agreement require arbitration or litigation to be conducted outside of the franchisee's state?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (f) A provision requiring that arbitration or litigation be conducted outside this state.
This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
NORTH DAKOTA ADDENDUM TO DISCLOSURE DOCUMENT
In the State of North Dakota only, this Disclosure Document is amended as follows:
THE SECURITIES COMMISSIONER HAS HELD THE FOLLOWING TO BE UNFAIR, UNJUST OR INEQUITABLE TO NORTH DAKOTA FRANCHISEES (NDCC SECTION 51-19-09):
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- Situs of Arbitration Proceedings: Franchise agreements providing that the parties must agree to the arbitration of disputes at a location that is remote from the site of the franchisee's business.
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- Restrictions on Forum: Requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota.
MINNESOTA ADDENDUM TO DISCLOSURE DOCUMENT
In the State of Minnesota only, this Disclosure Document is amended as follows:
- Minnesota Statutes, Section 80C.21 and Minnesota Rules 2860.4400(J) prohibit the franchisor from requiring litigation to be conducted outside Minnesota, requiring waiver of a jury trial, or requiring the franchisee to consent to liquidated damages, termination penalties or judgment notes.
RHODE ISLAND ADDENDUM TO DISCLOSURE DOCUMENT
In the State of Rhode Island only, this Disclosure Document is amended as follows:
Item 17, summary columns for (v) and (w) are amended to add the following:
Any provision in the franchise agreement restricting jurisdiction or venue to a forum outside Rhode Island or requiring the application of the laws of a state other than Rhode Island is void as to a claim otherwise enforceable under the Rhode Island Franchise Investment Act.
In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation.
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 Mediation Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to the 2024 Bombs Away Franchise Disclosure Document, the franchise agreement's requirements for arbitration and litigation vary by state. In general, the FDD indicates that certain states have laws that may override the franchise agreement's standard provisions regarding the location of arbitration or litigation.
For example, the North Dakota addendum states that it is considered unfair to require North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota or to agree to arbitration in a location remote from the franchisee's business. Similarly, the Minnesota addendum prohibits Bombs Away from requiring litigation to be conducted outside of Minnesota. The Rhode Island addendum indicates that any provision restricting jurisdiction or venue to a forum outside Rhode Island is void for claims enforceable under the Rhode Island Franchise Investment Act.
In Washington, any arbitration or mediation must occur in Washington or a mutually agreed-upon location. The California addendum notes that prospective franchisees should consult legal counsel regarding venue restrictions to forums outside of California. These addenda suggest that while the Bombs Away franchise agreement may contain standard clauses regarding the location of legal proceedings, these clauses are subject to state laws that may protect franchisees from having to litigate or arbitrate disputes in distant or unfavorable locations.
Prospective Bombs Away franchisees should carefully review the addendum specific to their state and consult with an attorney to understand their rights regarding choice of forum, choice of law, and arbitration proceedings. This is particularly important as the enforceability of certain provisions in the franchise agreement, such as those related to termination, renewal, and non-compete clauses, can also be affected by state laws.