Where will arbitration be conducted for Chatime franchise disputes?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
In conformance with §4 of the Illinois Franchise Disclosure Act, any provision in a franchise agreement that designates jurisdiction or venue in a forum outside the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.
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.
This franchise agreement provides that disputes are resolved through arbitration. A Maryland franchise regulation states that it is an unfair or deceptive practice to require a franchisee to waive its right to file a lawsuit in Mayland claiming a violation of the Maryland Franchise Law. In light of the Federal Arbitration Act, there is some dispute as to whether this forum selection requirement is legally enforceable.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the location of arbitration for franchise disputes depends on the state where the franchise is located. For instance, Illinois law states that while a Chatime franchise agreement can provide for arbitration to occur outside of Illinois, any provision designating jurisdiction or venue outside the state is void. This means that while arbitration might be held out-of-state, the franchisee is not obligated to litigate disputes outside of Illinois. Similarly, North Dakota finds it unfair for franchise agreements to mandate arbitration at a location far from the franchisee's business.
For Chatime franchises in Washington, the arbitration or mediation site must be either in the State of Washington or in a location mutually agreed upon at the time of arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. This ensures that Washington franchisees have a say in the location of arbitration proceedings, providing a degree of protection against being forced to arbitrate in inconvenient or distant locations.
Maryland's amendment to the Chatime Franchise Agreement indicates that there may be disputes as to whether the forum selection requirement is legally enforceable, considering the Federal Arbitration Act. This suggests that the enforceability of arbitration clauses may be contested, and franchisees should seek legal counsel to understand their rights and obligations regarding dispute resolution.