Competition Law Specialists

Using The Doctrine Of Direct Benefits Estoppel To Enforce An Arbitration Agreement Against A Non-Signatory To A Franchise Agreement.

Generally, California Corporation Code § 31125 prohibits a franchisor from soliciting its franchisee to materially modify the existing franchise agreement without the franchisor first delivering to the franchisee an application for registration of the material modification – identifying the proposed modification – either 5 business days before execution of the binding modification, or containing a statement advising the franchisee that it can rescind the agreement to the modification by written notice to the franchisor within 5 business days after the date of execution. . .

Frango Grille USA, Inc. v. Pepe’s Franchising Ltd., Business Franchise Guide (CCH) P 15,390 (July 21, 2014)

The contractual rights and responsibilities of the individual franchisees in a particular franchise system are generally uniform throughout that system. The franchisor achieves this homogeneity by (1) amending or supplementing earlier versions of its franchise agreement to reflect its current version of the document, and (2) requiring all franchisees to adhere to a single operations manual. Uniform obligations help instill consistency in the brand and simplify the franchisor’s monitoring and enforcement efforts.