If a Belocal franchisee files a claim in court that should have been arbitrated, who is responsible for the legal fees?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- (6) If Franchisor, Franchisee, or any of Franchisee's Principals files in court any claim that should have been brought in arbitration under this Section 14.C., and the other party succeeds in a motion to compel arbitration of such claim, the party filing such claim in court must reimburse the other party its reasonable attorneys' fees and costs for defending against the lawsuit and for its motion to compel arbitration.
Further, if prior to an arbitrator's final decision, either Franchisee, any of Franchisee's Principals, or Franchisor commences an action in any court for a claim that arises out of or relates to this Agreement (except for the purpose of enforcing this arbitration provision or as otherwise permitted by this Agreement), the party bringing the action in court shall be responsible for the other party's expenses of enforcing this arbitration provision, including court costs, arbitration filing fees, and other costs and attorneys' fees.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a franchisee files a claim in court that should have been brought to arbitration, and Belocal successfully compels arbitration, the franchisee is responsible for reimbursing Belocal's reasonable attorney's fees and costs. This includes the expenses Belocal incurs defending against the lawsuit and for its motion to compel arbitration. This provision is designed to discourage franchisees from circumventing the arbitration process outlined in the franchise agreement.
Furthermore, if a franchisee initiates a court action for a claim related to the franchise agreement before an arbitrator makes a final decision, the franchisee will be responsible for Belocal's expenses in enforcing the arbitration provision. These expenses include court costs, arbitration filing fees, other costs, and attorney's fees. This clause reinforces Belocal's commitment to resolving disputes through arbitration rather than litigation, except for specific instances outlined in the agreement.
This aspect of the Belocal franchise agreement is fairly standard within the franchise industry, as franchisors typically prefer arbitration to manage disputes efficiently and cost-effectively. It is important for prospective franchisees to understand that initiating court proceedings prematurely or against the terms of the agreement can result in significant financial responsibility for the franchisor's legal expenses. Franchisees should carefully consider the implications of this clause and seek legal counsel to fully understand their rights and obligations regarding dispute resolution.