USA Law and Practice Contributed by: David B. Ramsey and Michelle Murray-Bertrand, Kaufmann Gildin & Robbins LLP
applicable state franchise laws and non-waivable statutory protections. For example, Washington law generally requires cer - tain provisions in franchise agreements, including pro - visions addressing termination and renewal, to com - ply with statutory restrictions that limit a franchisor’s ability to terminate or refuse to renew a franchise. Similarly, Illinois law regulates termination and non- renewal and, in certain circumstances, requires a fran - chisor to provide advance notice and an opportunity to cure before termination. Prescribed state-specific addenda typically recite these provisions. However, these requirements can apply regardless of whether the agreement itself provides otherwise, illustrating why a franchise agreement that may be appropriate for one state may require state-specific modifications to comply with the requirements of another. 8.4 Prohibited Provisions in Local Law US federal law does not impose a uniform, nationwide “blacklist” of contractual provisions that are prohibited in franchise agreements. Instead, those states that have franchise relationship laws will primarily restrict the inclusion of certain provisions in franchise agree - ments as applied to franchises in the particular state at issue. These laws, which vary by jurisdiction and, in some cases, by the nature of the franchise, may expressly prohibit particular provisions or render pro - visions unenforceable when they conflict with manda - • provisions that waive or limit statutory rights relating to termination, non-renewal, notice, cure periods, transfers or other franchise relationship protections; • provisions permitting termination of the franchise agreement without “good cause” required by appli - cable law; • provisions requiring franchisees to waive rights or remedies afforded by the applicable state law; and • provisions imposing post-termination non-competi - tion restrictions prohibited or limited under applica - ble state law. tory statutory protections. Common examples include:
State franchise relationship laws may also restrict provisions concerning choice of law, forum selec - tion, arbitration and dispute resolution where those provisions have the effect of depriving franchisees of mandatory protections or access to remedies avail - able under the law of the state in which the franchised outlet operates. While franchisors generally have broad discretion in drafting their form of franchise agreement, that discre - tion is constrained by the mandatory franchise rela - tionship laws of each applicable jurisdiction. Accord - ingly, a provision that is permissible in one state may be void or unenforceable in another. Franchisors commonly address these differences through state- specific addenda to their standard franchise agree - ments to ensure compliance with the requirements of applicable state franchise relationship laws. 9. Dispute Resolution 9.1 Enforcement of Foreign Judgments Foreign judgments are easy to enforce in the USA, and foreign arbitration awards are enforced. The USA has been a party to the 1958 Convention on the Recogni - tion and Enforcement of Foreign Arbitral Awards (the “New York Convention”) since 1970, and that Con - vention is implemented in US law under Chapter 2 of the Federal Arbitration Act (in regard to arbitration awards). Generally, a foreign arbitration award or judg - ment can be enforced in the USA through a summary proceeding in US federal court, to convert it into a binding US federal judgment. US courts are generally very likely to enforce a foreign judgment or award, subject to narrow circumstances where grounds for refusal may apply. 10. Payment and Taxes 10.1 Restrictions or Limits on Franchisee Fees and Royalties US law does not generally impose restrictions on franchise fees, royalties or service fees, or an annual maximum payment in foreign currency of a maximum royalty. Subject to applicable state franchise laws, contract law, antitrust principles and other generally
90 FRANCHISING 2026
C HAMBERS.COM
Powered by FlippingBook