In an end-run around the Federal Arbitration Act, the wives of Snap-On Tool franchisees have won the right to present their fraud claims against the franchisor before a jury. The Snap-On wives, as they are affectionately called (evoking an image of wives hooked onto their husbands' belts like cell phones), sued the franchisor in New Jersey state court, claiming that they had been defrauded by Snap-On because their family was induced to invest its savings into the franchise. Because the Snap-On wives did not sign the franchise agreements, they argued that they were not bound to the arbitration clauses that prevented their husbands from suing Snap-On in court. This case presents a dangerous precedent and a warning to franchisors.
As a matter of practice (and presumably to address some debt and execution issues down the line), many franchisors require that franchisee spouses sign franchise agreements even if they will not operate the franchise. With this New Jersey ruling on arbitration clauses, it may become more difficult for married persons to avoid having both spouses sign the franchise agreement.
Posted by franchiselawblog at December 23, 2004 03:32 PM