A franchisee signing a franchise agreement may waive the right to a trial with a judge in a court of law should a dispute arise. The arbitration clause in franchise agreements has long been a point of contention that franchisees believe is unfair. When a franchise lawyer drafts the company’s franchise clause, the terms often state that all disputes between a franchise and franchisor will be settled by an arbitrator. The place of the arbitration is often at the convenience of the franchisor, such as in the same town as the home office, and may force the franchise to travel thousands of miles. Arbitration hearings can up to a week or more to complete and most franchisees cannot afford to be away from their business for that long or afford the hotel and living expenses associated with the stay. It is for that reason that most franchise disagreements are settled quickly and are in the favor of the franchisor unless the franchise has an experienced franchise attorney to fight on their behalf. This could all change if recent changes to the arbitration clause for the financial industry is adopted by the franchise industry.
Bank, brokerage, and credit card customers are forced to sign a hypothecation agreement, similar to a franchise agreement’s franchise clause, surrendering their right to take the company to court to settle a dispute and instead forcing arbitration on the disgruntled customer. A recent resolution signed by President Trump, however, changes that for the financial services industry and could have potential ramifications for enforcing a franchise agreement arbitration clause as well.
The Consumer Financial Protection Bureau (CFPB)s arbitration rule has been officially nullified by the Federal Register based on President Trump signing a joint resolution against the rule in early November of 2016. Bank, brokerage, and credit card customers will no longer be bound by restrictive arbitration clauses and now have their right restored to join class action litigation that may be brought against the financial institution. WWW.Pymnts.com reports that “According to news from Reuters, the CFPB rule was set to go into effect next spring, giving bank customers the option to file class-action lawsuits to lower their legal costs, and barred banks, credit card issuers and other financial companies from requiring customers to sign away their rights to join group lawsuits and agree to take potential disputes to closed-door arbitration as a condition of opening accounts.”
Negotiating a franchise disagreement and avoiding the costs of arbitration should always be your first priority. Franchise agreement and arbitration attorney Mario L. Herman is experienced in working with franchisors and franchisees to help settle their disputes in an amicable manner avoiding the necessity of arbitration if at all possible. Challenges to the legal standing of the franchise arbitration clause may someday soon restore a franchisee’s right to take serious disputes to court.