A recent California court decision rejects the contention by franchisees, who sued their franchisor, that the arbitration provision in their franchise agreement should not be enforced because it is unfair and unconscionable.
A new ruling by the United States Court of Appeals for the First Circuit in Awuah v. Coverall case is yet the latest in a string of recent court decisions that confirm the strength and enforceability of arbitration clauses in franchise agreements.
A recent Maryland court decision in a franchise dispute demonstrates the importance of a carefully-drafted arbitration clause.
A popular contractual tool for franchise systems is a mandatory arbitration provision. A pair of recent decisions suggest that, where a franchisor’s franchise agreement does not directly address the issue of class- or group-wide arbitration, franchisees may be able to consolidate their claims and proceed against the franchisor as a group. The cases illustrate the importance for a franchisor of ensuring that its franchise agreement’s arbitration clause is drafted carefully.