What happens if a party refuses to participate in the Settlement Conference or mediation within the specified time frames for a Bhc franchise?

According to Bhc's 2025 Franchise Disclosure Document, if either the franchisee or franchisor refuses to participate in the Settlement Conference or mediation within the time frames outlined in section 14.1 of the agreement, the other party has the right to immediately begin an arbitration proceeding as described in section 14.2.

This means that both parties are expected to engage in good-faith efforts to resolve disputes through a Settlement Conference and potentially mediation before resorting to binding arbitration. The initial step involves executive officers from Bhc and the franchisee's Principal Equity Operators meeting in person to discuss and negotiate a settlement. If this fails, the parties may then submit the dispute to non-binding mediation with a qualified mediator in California.

The consequence of refusing to participate in either the Settlement Conference or mediation is significant: the other party can bypass these initial steps and proceed directly to arbitration, which is a more formal and potentially costly method of dispute resolution. This provision encourages both parties to take the initial dispute resolution steps seriously and participate in good faith, as refusal can expedite the process towards a binding arbitration decision.

This type of clause is relatively common in franchise agreements, as it aims to promote efficient and cost-effective dispute resolution while also encouraging parties to maintain a working relationship. By including these steps, Bhc seeks to resolve disagreements amicably before they escalate into more serious and potentially damaging conflicts.