Franchise Lawyer Blog

Who Needs Lawyers?

Reading the current cases reported in the Franchise Law Journal (credits to its authors, Amy Cheng. Sarah Yatchak and Jason Strover), I came across a case in which a franchisee demanded that an arbitration provision be struck down as being unconscionable (Rodriguez v Tropical Smoothie Franchise Dev., Bus. Franchise Guide (CCH) #14,777 (S.D.Ohio, 1/3/12). We have discussed arbitration in this blog before. Arbitration provisions in franchise agreements frequently border on unconscionability, requiring franchisees to bring claims in the franchisor’s home state and, as in this case, requiring the franchisee to bear the expenses of the arbitration unless and until it wins.

What is essentially interesting about this case is that the franchisee relied on a claim of unconscionability by admitting that he had decided not to have an attorney review the franchise agreement before he signed it. The Court did not accept that argument, noting that entering into a franchise agreement is a significant businesss venture, which brings with it “significant financial risk and responsibility.” While the court in this case (applying Florida law) decided the arbitration clause was substantively unconscionable, it found that the franchisee had failed to prove that the clause was also procedurally unconscionable, because he could have had a lawyer explain it to him, but chose not to. And so the clause was upheld.

Moral of the story? If you are buying a franchise, entering into a multi-unit development deal, signing an area development agreement, or, for that matter, signing a lease or license agreement or any other kind of agreement, and you consider yourself savvy enough to fly solo and understand the agreement without the benefit of a lawyer, stop. Stop and go get competent legal counsel. Not us, necessarily, that’s not the point. The point is that when you sign something, you will be deemed to have read it and understood it. Understood not only how it applies in a common sense sitation, but also how it might be applied in a complex legal scenario where the outcome is not readily apparent. You will not be able to say you did not understand the nuances of what you signed because you didn’t hire a lawyer. So bite the bullet and hire one.

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