What restrictions regarding competition, arbitration, forum, damages, applicable laws, jury trial, and claim limitations have the North Dakota Securities Commissioner deemed unfair, unjust, or inequitable to Budget franchisees?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
The Securities Commissioner has held the following to be unfair, unjust or inequitable to North Dakota franchisees (Section 51-19-09, N.D.C.C.):
a. Restrictive Covenants: Franchise disclosure documents which disclose the existence of covenants restricting competition contrary to Section 9-08-06, N.D.C.C., without further disclosing that such covenants will be subject to this statute.
b. Situs of Arbitration Proceedings: Franchise Agreements providing that the parties must agree to the arbitration of the disputes at a location that is remote from the site of the franchisee's business.
c. Restriction on Forum: Requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota.
d. Liquidated Damages and Termination Penalties: Requiring North Dakota Franchisees to consent to liquidated damages or termination penalties.
e. Applicable Laws: Franchise Agreements which specify that they are to be governed by the laws of a state other than North Dakota.
f. Waiver of Trial by Jury: Requiring North Dakota franchisees to consent to the waiver of a trial by jury.
g. Waiver of Exemplary & Punitive Damages: Requiring North Dakota franchisees to consent to a waiver of exemplary and punitive damages.
h. General Release: Franchise Agreements that require the franchisee to sign a general release upon renewal of the Franchise Agreement.
i. Limitation of Claims: Franchise Agreements that require the franchisee to consent to a limitation of claims. The statute of limitations under North Dakota law applies."
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the North Dakota Securities Commissioner has identified several provisions as unfair, unjust, or inequitable to North Dakota franchisees. These restrictions primarily relate to legal and contractual rights within the franchise agreement.
Specifically, the Commissioner views restrictive covenants that limit competition as potentially problematic unless the franchise disclosure explicitly states that these covenants are subject to North Dakota law (Section 9-08-06, N.D.C.C.). The Commissioner also considers it unfair to require North Dakota franchisees to arbitrate disputes at locations remote from their business or to consent to the jurisdiction of courts outside of North Dakota.
Furthermore, Budget cannot require North Dakota franchisees to waive exemplary or punitive damages, agree to limitations on claims that would override North Dakota's statute of limitations, or waive their right to a trial by jury. Franchisees in North Dakota also cannot be forced to sign a general release upon renewal of their Franchise Agreement. These stipulations ensure that Budget franchisees in North Dakota retain certain legal protections and rights under state law, despite what the standard franchise agreement might otherwise dictate. These protections are included in Section 51-19-09, N.D.C.C.