To what provisions might Section 20040.5 still apply for Canine Dimensions franchisees?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The franchise agreement requires binding arbitration. The arbitration will occur in Florida with the costs being borne by the franchisee and franchisor. 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 a franchise agreement restricting venue to a forum outside the State of California. Business and Professions Code Section 20040.5 relating to forum selection clauses restricting venue outside the state of California or arbitration may be preempted by the Federal Arbitration Act. Section 20040.5 may still apply to any provision relating to judicial proceedings. A binding arbitration provision may not be enforceable under generally applicable contract defenses, such as fraud, duress, or unconscionability.
Source: Item 22 — CONTRACTS (FDD page 36)
What This Means (2025 FDD)
According to Canine Dimensions' 2025 Franchise Disclosure Document, California Business and Professions Code Section 20040.5, which concerns restrictions on venue selection outside of California, may still apply to provisions relating to judicial proceedings, even if arbitration is required in Florida. This is because the Federal Arbitration Act may preempt Section 20040.5 in cases of arbitration.
This means that while Canine Dimensions requires binding arbitration in Florida, a California franchisee might still be able to pursue judicial proceedings in California under certain circumstances. This could occur if the dispute falls outside the scope of the arbitration agreement or if the arbitration clause is deemed unenforceable under contract law.
However, the FDD also notes that a binding arbitration provision may not be enforceable under generally applicable contract defenses, such as fraud, duress, or unconscionability. Therefore, a prospective Canine Dimensions franchisee in California should consult with legal counsel to understand the full implications of the franchise agreement's venue and arbitration provisions, and how California and federal laws might apply to them.