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 statutes and sources on out-of-state forums (checked 28 October 2026)
StateWhat the source saysNote
California, Bus. & Prof. Code 20040.5A 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 705/4A 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.10A 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.

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