Does the Devon Creek franchise agreement allow for class-wide arbitration?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 20.3.2 All issues relating to arbitrability or the enforcement of the agreement to arbitrate contained in this Article 20 will be governed by the Federal Arbitration Act (9 U.S.C. §1 et seq.) and the federal common law of arbitration.
All hearings and other proceedings will take place in North Carolina, or the offices of the American Arbitration Association, or, if Franchisor so elects, in the county where the principal place of business of Franchisee is then located.
- 20.3.3 This arbitration provision is self-executing and will remain in full force and effect after expiration or termination of this Agreement.
Any arbitration will be conducted on an individual, and not a class-wide or multiple plaintiffs, basis.
If either party fails to appear at any properly noticed arbitration proceeding, an award may be entered against the party by default or otherwise, notwithstanding the failure to appear.
Judgment upon an arbitration award may be entered in any court having jurisdiction and will be binding, final and not subject to appeal.
No punitive or exemplary damages will be awarded against Franchisor, Franchisee, or entities related to either of them, in an arbitration proceeding or otherwise, and are hereby waived.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, the franchise agreement does not allow for class-wide arbitration. Instead, any arbitration will be conducted on an individual basis, meaning each dispute must be handled separately. This prevents franchisees from joining together to pursue a single arbitration case against Devon Creek.
This requirement for individual arbitration has several implications for prospective Devon Creek franchisees. It means that each franchisee must bear the costs and burdens of arbitration independently, which can be a significant financial and time commitment. If multiple franchisees have similar grievances, they cannot pool their resources or share legal representation in a single proceeding. This could make it more challenging and expensive for franchisees to pursue claims against the franchisor.
Furthermore, the arbitration provision specifies that all issues relating to arbitrability or the enforcement of the agreement to arbitrate will be governed by the Federal Arbitration Act. The location for hearings and other proceedings will be in North Carolina, at the American Arbitration Association offices, or, if Devon Creek elects, in the county where the franchisee's principal place of business is located. The agreement also states that no punitive or exemplary damages will be awarded against Devon Creek, the franchisee, or entities related to either of them.
This type of clause is increasingly common in franchise agreements, as franchisors seek to manage legal risks and avoid large class-action lawsuits. While individual arbitration can offer a faster and more cost-effective means of resolving disputes compared to traditional litigation, it may also place franchisees at a disadvantage due to the lack of collective bargaining power.