How are the costs associated with mediation divided between Bang Cookies and the franchisee?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
1946 (LANHAM ACT, 15 U.S.C. §§ 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF New Jersey, EXCEPT THAT ITS CHOICE OF LAW AND CONFLICTS OF LAWS RULES SHALL NOT APPLY AND ANY FRANCHISE REGISTRATION, DISCLOSURE, RELATIONSHIP OR SIMILAR STATUTE WHICH MAY BE ADOPTED BY THE STATE OF New Jersey SHALL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
18.G. NON-BINDING MEDIATION AND BINDING ARBITRATION
(1) Non-Binding Mediation – Franchisee and Franchisor agree that before either party may bring any action, dispute and/or controversy arising from or related to this Agreement and/or the franchise relationship between Franchisor and Franchisee in arbitration, the parties must first mediate the dispute through non-binding mediation. Mediation shall be non-binding and shall be conducted by the American Arbitration Association ("AAA") in accordance with the AAA's then current rules for the mediation of commercial disputes. All mediation proceedings shall be conducted in Bergen County, New Jersey or, if a mediator is not available in Bergen County, New Jersey then at a suitable location selected by the mediator that is located closest to Bergen County, New Jersey.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies' 2024 Franchise Disclosure Document, if a dispute arises that leads to mediation, both Bang Cookies and the franchisee are responsible for their own costs associated with the mediation. In addition to their individual costs, Bang Cookies and the franchisee are each responsible for paying 50% of the mediator's fee and 50% of the American Arbitration Association's (AAA) mediation fees.
This arrangement means that a franchisee entering into a dispute with Bang Cookies will need to budget not only for their own legal and consulting expenses but also for half of the mediator's charges and administrative fees from the AAA. This cost-sharing approach is a fairly standard practice in franchise agreements, as it ensures that both parties have a financial stake in resolving the dispute efficiently through mediation before escalating to potentially more expensive arbitration or litigation.
It is important to note that this cost division applies specifically to non-binding mediation, which is a preliminary step required before either party can pursue arbitration. The FDD specifies that the mediation will be conducted by the AAA in Bergen County, New Jersey, or a suitable location nearby selected by the mediator. This location requirement could add travel costs for franchisees located far from New Jersey. Franchisees should factor in these potential mediation expenses when assessing the overall financial implications of the Bang Cookies franchise agreement.