Are punitive or exemplary damages allowed against Baya Bar or the franchisee in an arbitration proceeding?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
- 20.3.3 This arbitration provision is self-executing and will remain in full force and effect after expiration or termination of this Agreement. Any arbitration will be conducted on an individual, and not a class-wide or multiple plaintiffs, basis. If either party fails to appear at any properly-noticed arbitration proceeding, an award may be entered against the party by default or otherwise, notwithstanding the failure to appear. Judgment upon an arbitration award may be entered in any court having jurisdiction and will be binding, final and not subject to appeal. No punitive or exemplary damages will be awarded against Franchisor, Franchisee, or entities related to either of them, in an arbitration proceeding or otherwise, and are hereby waived.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, neither the franchisor nor the franchisee can be awarded punitive or exemplary damages in an arbitration proceeding. The franchise agreement explicitly states that such damages are waived by both parties. This means that in the event of a dispute that goes to arbitration, the arbitrator cannot award damages intended to punish either party; they can only award damages to compensate for actual losses.
This waiver of punitive or exemplary damages applies not only to Baya Bar and its franchisees but also to entities related to either of them. This provision aims to limit the financial exposure of both parties in case of disputes, encouraging resolution based on actual harm rather than potential for inflated penalties.
For a prospective Baya Bar franchisee, this clause offers a degree of protection against excessive damage awards in arbitration. However, it also means that the franchisee cannot seek punitive damages from Baya Bar, even if the franchisor's actions are particularly egregious. This is a fairly common clause in franchise agreements, as it provides more predictable and potentially lower costs associated with dispute resolution.