Forum-selection clauses in franchise agreements
A forum-selection clause names where a dispute must be heard. Federal courts give valid clauses heavy weight, and some state franchise statutes limit them.
A forum-selection clause names the court, or the city and arbitration body, where disputes under the agreement must be brought. In franchise agreements it often points to the franchisor's home state, which can be far from the franchised location. The clause is summarized in Item 17 of the disclosure document (the "choice of forum" row), and the full text is in the agreement. See Item 17.
The general federal rule
In Atlantic Marine Construction Co. v. U.S. District Court for the W.D. Tex. (decided 3 December 2013), the Supreme Court said a valid forum-selection clause should be given controlling weight in all but the most exceptional cases. A defendant enforces such a clause by moving to transfer, and the court should generally transfer unless extraordinary circumstances unrelated to the parties' convenience weigh against it. The decision is general, not about franchises, so a franchise agreement's venue clause is likely to matter in federal court. State law can differ.
What some state sources say
Some states limit out-of-state forums by statute. The table gives what each text says, in general terms. Illinois and Michigan were read from mirror sites of the statutes, so check the official text.
| State | What the source says | Note |
|---|---|---|
| California, Bus. & Prof. Code 20040.5 | A franchise agreement provision restricting venue to a forum outside the state is void for claims relating to a franchise business operating in California. | Official legislature site |
| Illinois, 815 ILCS 705/4 | A provision designating jurisdiction or venue outside Illinois is void, but a franchise agreement may provide for arbitration in a forum outside the state. | Mirror; check the official text |
| Iowa, Code 537A.10 | A provision restricting jurisdiction to a forum outside the state is void for a claim otherwise enforceable under that section. | Official legislature site |
| Michigan, MCL 445.1527(f) | A provision requiring arbitration or litigation outside Michigan is void; a franchisee may still agree, at the time of arbitration, to a location outside the state. | Mirror; check the official text |
Washington and other cases
Washington's statute voids waivers of the Franchise Investment Protection Act, including choice-of-law provisions, but the section as read does not expressly mention forum clauses. Separately, the Washington Department of Financial Institutions has stated in an interpretive statement (updated 13 March 2020) that it will not register a franchise offering whose agreement sets arbitration or mediation outside Washington, unless the site is in Washington, is mutually agreed at the time, or is set by the arbitrator or mediator. That is a registration policy, not a ruling on any one contract.
Minnesota's statute voids provisions, including choice-of-law provisions, that waive compliance with its franchise law; the text read does not mention forum selection. For states not listed, nothing was checked beyond the statutes cited on each state's page. For states without a franchise relationship statute, see states without franchise relationship laws.
Forum and arbitration together
Federal law backs written arbitration clauses (9 U.S.C. 2, 3 and 4), and several state statutes allow arbitration while limiting court forums. If your agreement has both a venue clause and an arbitration clause, the two interact; see the arbitration clause explained and AAA costs. Your own agreement controls, and a lawyer licensed in the state where you operate can say how that state's rules apply to it.
Where this came from
- Atlantic Marine Construction Co. v. U.S. District Court, decided 2013, docket 12-929 (checked 28 October 2026).
- Cal. Bus. & Prof. Code 20040.5 (checked 28 October 2026).
- 815 ILCS 705/4 and 705/41, Justia mirror (checked 28 October 2026).
- Iowa Code 537A.10 (checked 28 October 2026).
- MCL 445.1527, Justia mirror (checked 28 October 2026).
- RCW 19.100.220 (checked 28 October 2026).
- Washington DFI Franchise Act Interpretive Statement FIS-04 (checked 28 October 2026).