Under the Afuri Ramen Dumpling agreement, what costs can the prevailing party recover in an arbitration?

According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, the prevailing party in any arbitration, insolvency proceeding, bankruptcy proceeding, suit, or action to enforce the Franchise Agreement is entitled to recover specific costs. These recoverable costs include arbitration costs, proceeding costs, court costs, and reasonable attorneys' fees. The specific amount of these costs and fees will be determined by the arbitration, proceeding, or court handling the matter. This also includes costs and attorneys' fees associated with any appeals or reviews of the initial decision. The "prevailing party" is defined as the party who obtains the most significant relief in the legal action.

For a prospective Afuri Ramen Dumpling franchisee, this clause has significant implications. It means that if a franchisee is involved in a dispute with Afuri Ramen Dumpling and prevails in court or arbitration, Afuri Ramen Dumpling will be responsible for covering the franchisee's legal costs, including attorney fees. Conversely, if Afuri Ramen Dumpling prevails, the franchisee would be responsible for Afuri Ramen Dumpling's legal costs. This creates a financial risk for franchisees who may consider legal action against the franchisor, as they could be liable for substantial legal fees if they do not win the case.

This type of clause is relatively standard in franchise agreements. It aims to discourage frivolous lawsuits and encourage parties to resolve disputes amicably. However, it also places a greater burden on the franchisee to carefully assess the merits of their case before initiating legal proceedings, given the potential financial consequences of losing. Franchisees should consult with an experienced franchise attorney to fully understand the implications of this clause and to evaluate their legal options in the event of a dispute with Afuri Ramen Dumpling.