Can Bombs Away require arbitration or litigation to be conducted outside of the franchisee's state?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD 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. In addition, nothing in the Franchise Disclosure Document or agreement(s) can abrogate or reduce (1) any of the franchisee's rights as provided for in Minnesota Statutes, Chapter 80C or (2) franchisee's rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.
(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.
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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.
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. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.
Section 4 of the Act provides that any provision in a franchise agreement that designates jurisdiction or venue outside the State of Illinois is void. However, a franchise agreement may provide for arbitration outside of Illinois.
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.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to the 2024 Bombs Away FDD, the franchise agreement's stipulations regarding the location of arbitration or litigation proceedings are subject to certain state laws.
Specifically, the FDD includes addenda for several states that address this issue. For instance, in Minnesota, the FDD states that the franchisor cannot require litigation to be conducted outside of Minnesota. Similarly, the North Dakota addendum indicates that it is considered unfair and inequitable for franchise agreements to mandate arbitration at a location remote from the franchisee's business or to require North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota. In Washington, for 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. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.
The Illinois addendum notes that while a franchise agreement may provide for arbitration outside of Illinois, any provision that designates jurisdiction or venue outside the State of Illinois is void. Finally, the Rhode Island addendum states that 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.
These addenda modify the standard franchise agreement to comply with state-specific franchise laws, meaning that Bombs Away franchisees' ability to pursue legal action in their home state depends on the laws of the state in which they are franchising. Bombs Away franchisees should carefully review the addendum for their state, and consult with an attorney, to understand their rights regarding choice of forum, choice of law, and arbitration/litigation proceedings.