Which state's laws govern the Dq Treat agreement?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that: "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under this Act."
- B. Notwithstanding anything contained in Paragraph 12 of the Operating Agreement, any arbitration proceeding shall take place in the city nearest to the authorized location in which the American Arbitration Association shall maintain an office and facility for arbitration, or at such other location as may be mutually agreed upon by the parties. Any provision requiring franchisees to consent to the jurisdiction of courts outside North Dakota or to consent to the application of laws of a state other than North Dakota may be unenforceable under North Dakota law. If the laws of a state other than North Dakota govern, to the extent that such law conflicts with North Dakota law, North Dakota law will control.
Source: Item 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
The 2025 Dq Treat FDD includes addenda that address specific state laws which may override certain provisions of the standard franchise agreement. For example, the addendum for Rhode Island states that any clause in the franchise agreement that mandates the application of another state's laws is void within Rhode Island. Similarly, the North Dakota addendum indicates that if the laws of another state conflict with North Dakota law, North Dakota law will take precedence.
These addenda suggest that while the Dq Treat agreement may be drafted with a specific state's laws in mind (likely Delaware, where American Dairy Queen Corporation is incorporated), the enforceability of certain provisions can vary significantly depending on the franchisee's location. This is a common practice in franchising to ensure compliance with varying state franchise laws, which aim to protect franchisees.
Prospective Dq Treat franchisees should carefully review the addendum specific to their state and consult with an attorney to understand which laws will govern their franchise agreement. This is crucial for understanding their rights and obligations, especially concerning dispute resolution, termination clauses, and covenants not to compete. The FDD excerpts provided do not explicitly state which state's laws govern the agreement in the absence of conflicting state laws, so it is important to clarify this with Dq Treat during the due diligence process.