What is the consequence of failing to submit a dispute to mediation before starting litigation or arbitration against All Team?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
Failure to submit the dispute to Mediation prior to commencing any litigation or arbitration proceeding shall be grounds for dismissal of the litigation or arbitration proceedings.
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In the event that the FRANCHISEE or its guarantors have not complied with the provisions in this Section on Dispute Resolution, FRANCHISEE shall reimburse ATFC for all of its expenses incurred in curing the FRANCHISEE's breach (including, without limitation, ATFC's attorneys' fees and costs related to dismissing and responding to any improperly filed claim) and pay the ATFC a Dispute Resolution Fee of $50,000 ("Dispute Resolution Fee"). FRANCHISEE acknowledges and agrees that the ATFC will be damaged by such breach. FRANCHISEE agrees that a precise calculation of the full extent of the damages that ATFC will incur from the breach of the Dispute Resolution provisions of this Agreement are difficult to determine and all parties desire certainty in this matter and agree that the Dispute Resolution Fee provided herein is reasonable and constitute liquidated damages and not a penalty. ATFC has the right to collect these amounts in addition to exercising any and all other rights ATFC may have for non-compliance under this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, franchisees are required to participate in mediation before initiating any litigation or arbitration proceedings against All Team. This initial mediation step is mandatory for resolving disputes related to the franchise agreement or the franchise relationship. The mediation aims to facilitate a resolution through a non-binding process, typically held in Tampa, Florida, unless both parties agree to an alternative location.
Failing to adhere to this mediation requirement before starting litigation or arbitration has a specific consequence. The FDD states that such failure "shall be grounds for dismissal of the litigation or arbitration proceedings." This means that if a franchisee bypasses the mediation step and directly initiates a lawsuit or arbitration, All Team can seek to have the case dismissed by the court or arbitrator.
In addition to the dismissal of the case, the franchisee may also be responsible for covering All Team's expenses related to addressing the improperly filed claim. The FDD specifies that the franchisee must reimburse All Team for all expenses incurred in curing the franchisee's breach, including attorneys' fees and costs related to dismissing and responding to the improperly filed claim. Furthermore, the franchisee must pay All Team a Dispute Resolution Fee of $50,000. This fee is considered liquidated damages, meant to compensate All Team for the damages resulting from the breach of the dispute resolution provisions. All Team retains the right to collect these amounts in addition to any other rights they may have for non-compliance under the agreement.