Does the requirement for non-binding mediation apply to disputes concerning the relationship between Bang Cookies and the franchisee?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
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. Mediation shall be conducted by one mediator and if Franchisor and Franchise cannot agree on a mediator then the mediator shall be selected by AAA. Mediation shall be conducted within 45 days of AAA's designation and/or acknowledgment of the selected mediator or such longer period as may be agreed to between Franchisor and Franchisee in writing and signed by each respective party. Franchisor and Franchisee shall each be responsible for their own costs associated with mediation and Franchisor and Franchisee shall each be responsible for and shall each pay 50% of the mediator's fee and AAA's mediation fees.
Notwithstanding the preceding paragraph, Franchisor and Franchisee agree this Sub-Article 18.G.(1) and, thereby, the prerequisite requirement of non-binding mediation, shall not, at Franchisor's election, apply to: (a) any claims or disputes related to or concerning a breach of this Agreement by Franchisee that, under the terms of this Agreement, may entitle Franchisor to the award of injunctive relief including, but not limited to, Franchisee's violation or purported violation of Article 6 of this Agreement; and/or (b) claims by either Franchisor or Franchisee under this Agreement that relates to either Franchisor's or Franchisee's failure to pay fees or other monetary obligations due under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, before either party can initiate arbitration for any dispute arising from the franchise agreement or the franchise relationship, both Bang Cookies and the franchisee must first attempt to resolve the issue through non-binding mediation. This mediation process is to be conducted by the American Arbitration Association (AAA) following their established rules for commercial disputes. The mediation will take place in Bergen County, New Jersey, or, if a mediator isn't available there, at a location closest to Bergen County selected by the mediator. A single mediator will preside over the mediation, and if Bang Cookies and the franchisee cannot agree on a mediator, the AAA will appoint one. The mediation must occur within 45 days of the AAA's designation of the mediator, unless both parties agree to a longer period in writing. Both Bang Cookies and the franchisee are responsible for their own costs associated with the mediation, and they will each cover 50% of the mediator's fee and the AAA's mediation fees.
However, the requirement for non-binding mediation does not apply in certain situations, at Bang Cookies's discretion. Specifically, if the dispute involves a breach of the Franchise Agreement by the franchisee that could entitle Bang Cookies to injunctive relief, or if the dispute relates to the failure of either Bang Cookies or the franchisee to pay fees or other monetary obligations under the agreement, Bang Cookies can choose to bypass mediation and proceed directly to arbitration or other legal action.
This means that while mediation is generally a prerequisite for resolving disputes, Bang Cookies retains the option to waive this requirement in specific cases, particularly those involving breaches by the franchisee or failures to meet financial obligations. This clause could potentially benefit Bang Cookies by allowing them to quickly address serious violations of the agreement without the delay of mediation. Prospective franchisees should be aware of these exceptions and consider the potential implications for dispute resolution.