Can the arbitrator assess punitive damages in an Alloy dispute?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ignificant experience in franchise law. A judgment may be entered upon the arbitration award by any state or federal court in the state where we maintain our headquarters or the state where your Facility is located. The decision of the arbitrator will be final and binding on all parties to the dispute; however, the arbitrator may not under any circumstances: (1) stay the effectiveness of any pending termination of this Agreement; (2) assess punitive or exemplary damages; or (3) make any award which extends, modifies or suspends any lawful term of this Agreement or any reasonable standard of business performance that we set.
This arbitration provision is self-executing. Specifically, the arbitration may proceed, and the arbitrator has jurisdiction, regardless of whether any party fails to actively participate or appear.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, an arbitrator is not allowed to assess punitive or exemplary damages. The document states that the arbitrator's decision is final and binding, but explicitly prohibits the arbitrator from assessing punitive damages. This limitation is further reinforced by a clause where both Alloy and the franchisee agree to waive their rights to claim punitive damages, limiting recovery to actual damages sustained.
This means that if a dispute arises between Alloy and a franchisee that goes to arbitration, the arbitrator's power is limited. While they can make a final and binding decision, they cannot award damages intended to punish Alloy for misconduct. The franchisee is restricted to recovering only the direct financial losses they have suffered.
This waiver of punitive damages is a significant point for potential franchisees to consider. It reduces the potential financial risk for Alloy in dispute resolution, while also limiting the potential financial recovery for the franchisee. While this type of clause is not uncommon in franchise agreements, prospective franchisees should carefully weigh the implications and consult with legal counsel to understand their rights and options in case of a dispute with Alloy.