Is arbitration outside of Illinois permitted in a Deka Lash franchise agreement, despite restrictions on jurisdiction and venue?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
ILLINOIS ADDENDUM TO THE FRANCHISE AGREEMENT
If any of the terms of the Franchise Agreement are inconsistent with the terms below, the terms below control
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- Illinois law governs the Franchise Agreement.
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- In conformance with Section 4 of the Illinois Franchise Disclosure Act, any provision in a franchise agreement that designates jurisdiction and venue in a forum outside of the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.
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- Franchisee rights upon termination and non-renewal are set forth in sections 19 and 20 of the Illinois Franchise Disclosure Act.
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- In conformance with Section 41 of the Illinois Franchise Disclosure Act, any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with the Illinois Franchise Disclosure Act or any other law of Illinois is void.
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- No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
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- Surety Bond. The Franchise Agreement is modified to also provide the following: "Based on our current financial condition, the Illinois Attorney General's Office has required a financial assurance which is being satisfied by posting a surety bond which we filed with the Illinois Attorney General's Office."
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, the Illinois Addendum to the Franchise Agreement clarifies the legal relationship between Deka Lash and its franchisees in Illinois. Specifically, while Illinois law governs the franchise agreement, and any provision designating jurisdiction and venue outside of Illinois is void, the agreement explicitly states that arbitration may occur outside of Illinois. This means that while a Deka Lash franchisee in Illinois cannot be forced to litigate a dispute in another state, they can be required to participate in arbitration proceedings outside of Illinois.
This distinction is important for prospective Deka Lash franchisees in Illinois because it clarifies the scope of their legal rights. While they are protected from having to resolve disputes in a potentially inconvenient or biased legal jurisdiction, they may still incur the costs and logistical challenges associated with traveling to and participating in arbitration hearings in another state. Arbitration is a form of alternative dispute resolution that is generally faster and less expensive than traditional litigation, but it can still involve significant expenses, such as attorney fees, travel costs, and arbitrator fees.
The Illinois Addendum also includes other important protections for franchisees, such as voiding any provisions that require them to waive compliance with Illinois franchise law and preventing the use of certain statements or acknowledgments to disclaim reliance on franchisor representations. Additionally, Deka Lash has a surety bond on file with the Illinois Attorney General's Office. These provisions collectively aim to safeguard the rights and interests of Deka Lash franchisees operating in Illinois, but the allowance for out-of-state arbitration remains a notable consideration for franchisees when evaluating the franchise agreement.
It is important for potential Deka Lash franchisees in Illinois to carefully review the Illinois Addendum and understand its implications, particularly the provision regarding arbitration outside of Illinois. Franchisees should consult with a legal professional to fully understand their rights and obligations under the franchise agreement and to assess the potential costs and risks associated with out-of-state arbitration.