Does the restriction on required referral of controversies apply to arbitration before an independent arbitrator in the Crab N Spice franchise agreement?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
Restrictive Covenants: Every contract by which Franchisee, any Guarantor, or any other person is restrained from exercising a lawful profession, trade, or business of any kind is subject to NDCC Section 9-08-06. (2) Situs of Arbitration Proceedings: Franchisee and any Guarantor are not required to agree to the arbitration of disputes at a location that is remote from the site of Franchisee's business. (3) Restrictions on Forum: Franchisee and any Guarantor are not required to consent to the jurisdiction of courts outside of North Dakota.
In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration, or as determined by the arbitrator.
Source: Item 22 — CONTRACTS (FDD pages 50–51)
What This Means (2024 FDD)
Based on the 2024 Crab N Spice Franchise Disclosure Document, the franchise agreement includes state-specific addenda that address arbitration and related restrictions. For instance, the North Dakota Rider specifies that franchisees and any guarantors are not required to agree to arbitrate disputes at a location remote from the franchisee's business. Similarly, in Washington, any arbitration involving a franchise purchased there must occur within the state or a mutually agreed-upon location, or as determined by the arbitrator.
These state-specific provisions suggest that the enforceability and location of arbitration can vary depending on the franchisee's location. This is a critical consideration for prospective franchisees, as it affects their ability to resolve disputes efficiently and cost-effectively. The FDD indicates that these riders amend the franchise agreement to comply with local laws, which may provide more favorable terms for the franchisee than the standard agreement.
However, the documents do not explicitly state whether the restriction on required referral of controversies applies to arbitration before an independent arbitrator. A prospective franchisee should clarify with Crab N Spice under what conditions mandatory arbitration is required, and if the selection of an independent arbitrator is guaranteed. Understanding these details is essential for assessing the potential risks and costs associated with dispute resolution under the franchise agreement.