What is the potential conflict regarding arbitration for Ledgers franchisees in Maryland?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. Item 17.u. of the FDD and Section 9.2E of the FA is modified to also provide,
- "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 Maryland 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 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers's 2025 Franchise Disclosure Document, there is a potential conflict concerning the requirement for franchisees to resolve disputes through arbitration in Maryland. The FDD indicates that Maryland franchise regulations consider it an unfair or deceptive practice if a franchisor requires a franchisee to waive their right to file a lawsuit in Maryland, particularly for violations of Maryland Franchise Law. However, this conflicts with the Federal Arbitration Act, leading to uncertainty about whether the forum selection requirement in Ledgers's Franchise Agreement is legally enforceable in Maryland.
This conflict means that a Ledgers franchisee in Maryland might face legal challenges if they attempt to sue Ledgers for violating Maryland franchise law, as the franchise agreement mandates arbitration. The franchisee could potentially be compelled to resolve the dispute through arbitration rather than through the Maryland court system, which could limit their legal options and rights.
Prospective franchisees in Maryland should be aware of this potential conflict and seek legal advice to understand their rights and obligations regarding dispute resolution. It is important to understand the implications of the arbitration clause and how it might affect their ability to pursue legal remedies under Maryland law. This uncertainty highlights the importance of carefully reviewing the franchise agreement and understanding the legal landscape in Maryland before investing in a Ledgers franchise.