What is the effect of the Federal Arbitration Act on the Caring Transitions franchise agreement?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
Except to the extent governed by the U.S.
Trademark Act of 1946, the Federal Arbitration Act, the laws of the State of Ohio (without reference to Ohio conflict of laws principles) govern all aspects of this agreement, excluding any law regulating the sale of franchises or business opportunities, or governing the relationship between a franchisor and a franchisee, unless the jurisdictional requirements of such laws are met independently without reference to this section; provided, however, that if any of the covenants contained in Article 15 of this agreement would not be enforceable under the laws of Ohio and the franchised business is located outside of Ohio, then such covenants shall be interpreted and construed under the laws of the state in which the franchised business is located.
Ohio law shall prevail in the event of any conflict of law, except as specifically provided otherwise by any applicable state franchise investment laws, rules or regulations.
If any provision of this agreement relating to termination, nonrenewal or assignment of the franchise or choice of law, jurisdiction or venue is inconsistent with any applicable state franchise investment law, rules or regulations, such applicable state law shall apply.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 41–49)
What This Means (2025 FDD)
According to Caring Transitions's 2025 Franchise Disclosure Document, the Federal Arbitration Act plays a role in governing the franchise agreement. Specifically, the franchise agreement states that, except to the extent governed by the U.S. Trademark Act of 1946, the Federal Arbitration Act, and the laws of the State of Ohio (without reference to Ohio conflict of laws principles) govern all aspects of the agreement. This excludes any law regulating the sale of franchises or business opportunities, or governing the relationship between a franchisor and a franchisee, unless the jurisdictional requirements of such laws are met independently without reference to this section.
In practical terms, this means that disputes between Caring Transitions and its franchisees may be subject to arbitration under the Federal Arbitration Act. Arbitration is a method of resolving disputes outside of the court system, where a neutral third party (the arbitrator) hears evidence and makes a decision. The inclusion of the Federal Arbitration Act suggests that Caring Transitions intends for disputes to be resolved through arbitration rather than litigation, which is a common practice in franchising.
However, the franchise agreement also includes some caveats. For instance, if any of the covenants contained in Article 15 of the agreement would not be enforceable under the laws of Ohio and the franchised business is located outside of Ohio, then such covenants shall be interpreted and construed under the laws of the state in which the franchised business is located. Additionally, if any provision of this agreement relating to termination, nonrenewal or assignment of the franchise or choice of law, jurisdiction or venue is inconsistent with any applicable state franchise investment law, rules or regulations, such applicable state law shall apply. These exceptions indicate that state laws may take precedence over the Federal Arbitration Act in certain specific situations, particularly those involving franchise-specific regulations.
Prospective franchisees should be aware of these provisions and understand that while the Federal Arbitration Act generally governs the agreement, there are circumstances where state laws could override it. It is advisable to consult with a legal professional to fully understand the implications of these clauses and how they might affect their rights and obligations under the Caring Transitions franchise agreement.