It is commonplace for franchise agreements to contain a dispute resolution provision requiring a franchisee to pursue claims against a franchisor through the use of private binding arbitration, as opposed to the judicial court system. However, the United States Court of Appeals for the Seventh Circuit recently reiterated that an arbitration agreement that allows one party (i.e. the franchisor) the unfettered right to alter the arbitration agreement’s existence or its scope is illusory and unenforceable. See Druco Restuarants, Inc. v. Steak N Shake Enterprises, Inc., Nos. 13-3489, 13-3490, 13-3491 August 29, 2014. If you own a franchise, give us a call today to check to see if the arbitration provision in your agreement is still enforceable.
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