In Belocal franchise arbitration, which party is responsible for paying the reasonable costs and fees, including attorneys' fees?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) The costs and expenses of arbitration paid to the AAA and to the arbitrator shall initially be paid equally by the two sides to the arbitration. All other arbitration-related expenses, including but not limited to attorneys' fees and travel expenses, shall be paid initially by the party which incurred such expense. Notwithstanding the foregoing, the arbitrator must award to the prevailing party the reasonable costs and fees, including attorneys' fees, incurred in the arbitration.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the costs and expenses for arbitration paid to the AAA (American Arbitration Association) and the arbitrator will initially be split equally between both parties involved. However, all other arbitration-related expenses, such as attorneys' fees and travel expenses, are initially the responsibility of the party that incurs them.
Ultimately, the arbitrator will determine which party is the prevailing party and will award that party the reasonable costs and fees, including attorneys' fees, that they incurred during the arbitration. This means that while each party initially covers their own attorney fees and travel, the winning party can recover these costs from the losing party.
This arrangement is fairly standard in franchise agreements, as it encourages both parties to engage in arbitration in good faith. The potential to recover costs incentivizes a party with a strong case to pursue arbitration, while the risk of paying the other party's fees discourages frivolous claims. A prospective Belocal franchisee should consider these potential costs and benefits when evaluating the franchise agreement.