In a legal dispute involving Bhc, who is responsible for covering the legal fees and expenses of the other party?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
14.4 Legal Fees and Expenses.
The prevailing party in any arbitration or litigation to resolve a dispute between any of the parties hereto will be entitled to recover from the losing party reasonable legal fees (and incurred costs of the prevailing party's counsel) and all other "Expenses" (as defined in section 16.2(e) below) incurred by the prevailing party in bringing or defending such arbitration, action or proceeding and/or enforcing any resulting award or judgment (including without limitation arbitration or court filing fees, expert and other witness fees, discovery expenses and compensation payable to the arbitrator), whether incurred prior to or in preparation for or in contemplation of the filing of the action or thereafter. The prevailing party will be determined by the arbitrator or court. This section 14.4 is (i) intended to be expressly severable from the other provisions of this Agreement, (ii) intended to survive any judgment, and (iii) not to be deemed merged into the judgment.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the prevailing party in any arbitration or litigation will be entitled to recover reasonable legal fees and expenses from the losing party. This includes costs incurred in bringing or defending the action, enforcing any resulting award or judgment, arbitration or court filing fees, expert and witness fees, discovery expenses, and compensation payable to the arbitrator. The determination of the prevailing party will be made by the arbitrator or court. This obligation extends to expenses incurred before, during, or in preparation for filing the action.
This arrangement means that a Bhc franchisee who wins a legal dispute with Bhc would have their legal costs covered by Bhc. Conversely, if Bhc wins, the franchisee would be responsible for Bhc's legal costs. This allocation of legal fees can significantly impact the financial risks associated with disputes. Franchisees should be aware of this clause, as it could add substantial costs if they lose a legal battle with the franchisor.
Such clauses are relatively common in franchise agreements, as they aim to discourage frivolous lawsuits and ensure that the party at fault bears the financial burden of the dispute. However, the specific definition of 'Expenses' is crucial. In Bhc's case, it includes a comprehensive list of costs, such as attorney's fees, court costs, expert fees, and travel expenses, providing clarity on what can be recovered. Franchisees should carefully consider the potential financial implications of this clause before entering into an agreement with Bhc.