Franchise Glossary
Arbitration Clause
What is Arbitration Clause in franchising?
A provision in your franchise agreement requiring that disputes be resolved through private arbitration rather than a courtroom lawsuit. Most franchise agreements include one, typically specifying that arbitration takes place in the franchisor's home city under rules set by the American Arbitration Association. Arbitration decisions are binding and very difficult to appeal, you may have to travel across the country to participate, and many clauses also waive your right to join a class action. Review this clause carefully with a franchise attorney before signing.