Who is entitled to expenses in disputes relating to the Annex Brands agreement?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
w to enforce.
- F. COSTS AND ATTORNEYS' FEES. If a claim for amounts owed by Franchisor or Franchisee is asserted in any judicial proceeding, arbitration or appeal thereof, or if either party seeks to enforce or interpret this Agreement or Continuing Personal Guarantee (Attachment 2) in any judicial proceeding, arbitration or appeal thereof, the party substantially prevailing in such proceeding will be entitled to reimbursement of its costs and expenses (including reasonable accounting, expert and witness fees, and reasonable attorneys' fees) through appeal.
- G. FRANCHISEE MAY NOT WITHHOLD PAYMENTS.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to the 2025 FDD, in disputes involving claims for amounts owed or to enforce or interpret the Annex Brands agreement, the party that substantially prevails is entitled to reimbursement of costs and expenses. These costs and expenses include reasonable accounting, expert, and witness fees, as well as reasonable attorneys' fees, through any appeals. This means that if an Annex Brands franchisee sues Annex Brands and wins, Annex Brands must cover the franchisee's legal costs, and vice versa.
This arrangement encourages both Annex Brands and its franchisees to pursue only well-founded claims and defenses, as the risk of paying the other party's legal fees can be significant. It also provides a mechanism for franchisees to seek redress if they have a legitimate grievance without fear of being bankrupted by legal costs. However, it's important to note that the 'substantially prevailing' standard can sometimes be subjective and may require a court or arbitrator to determine which party truly won the dispute.
Additionally, the FDD specifies that a Covenantor (likely referring to a guarantor of the franchise agreement) also promises to pay Annex Brands' costs and expenses, including reasonable attorneys' fees, if Annex Brands has to enforce the agreement. This clause appears in a separate section related to enforcement costs and highlights the importance of fulfilling obligations under the franchise agreement to avoid incurring additional financial burdens.
It is fairly common in franchise agreements for the prevailing party to be entitled to legal fees. Prospective franchisees should carefully consider this clause and understand the potential financial implications of any legal disputes with Annex Brands.