In Brain Balance franchise disputes, who is responsible for covering the expenses of arbitration, including attorney's fees?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
20.01. Except as provided in Section 20.02 below, COMPANY and FRANCHISEE agree that any and all disputes between them, and any claim by either party that cannot be amicably settled (including tort as well as contract claims, claims based upon any federal, state, or local statute, law, order, ordinance, or regulations, and claims arising from any relationship prior to, at the time of entering, during the term of, or upon or after expiration or termination of this Agreement) except for claims relating to the Marks or other service marks or commercial symbols of COMPANY, shall be determined solely and exclusively by arbitration under the Federal Arbitration Act, as amended, and in accordance with the rules then obtaining of the American Arbitration Association or any successor at its office located in San Francisco, ou, unless the parties otherwise agree in writing. COMPANY and FRANCHISEE consent to personal jurisdiction and hereby waive all objections to personal jurisdiction or venue for the purpose of carrying out the purposes of this Paragraph 20.01. The arbitrator(s) may not under any circumstance: (i) stay the effectiveness of any pending termination; (ii) assess punitive, speculative, or exemplary damages; or (iii) make any award that extends, modifies, or suspends any lawful term of this Agreement or any reasonable standard of business performance set by COMPANY in good faith. The arbitrator(s) shall be limited to the issues in dispute between COMPANY and FRANCHISEE and a dispute between any other franchisee and COMPANY shall not be considered in the same arbitration proceeding or by the same arbitrator(s). The parties shall each bear their own expense, including but not limited to all fees and expenses of the arbitrator(s), the American Arbitration Association, attorneys, and accountants. Judgment upon any award of the arbitrator(s) shall be conclusive and binding and shall be entered in a court of competent jurisdiction.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, in the event of arbitration, both Brain Balance and the franchisee are responsible for their own expenses. This includes all fees and expenses related to the arbitrator(s), the American Arbitration Association, attorneys, and accountants. This arrangement applies to any disputes between Brain Balance and the franchisee that cannot be settled amicably, encompassing contract and tort claims, as well as claims based on federal, state, or local statutes, laws, orders, ordinances, or regulations. The only exception to this arbitration agreement is for claims relating to Brain Balance's trademarks, service marks, or commercial symbols.
This "each party bears their own expenses" clause is a fairly common arrangement in franchise agreements. It means that a franchisee entering into a dispute with Brain Balance will need to budget not only for potential damages or settlements but also for the full cost of their legal representation and a share of the arbitration expenses. This can create a significant financial burden, especially for smaller franchisees or those in the early stages of their business.
It is important to note that the arbitrator's powers are limited. They cannot stay any pending termination, assess punitive damages, or modify any lawful term of the franchise agreement. The arbitrator is restricted to resolving the specific issues in dispute between Brain Balance and the franchisee, and cannot consider disputes involving other franchisees. The judgment upon any award made by the arbitrator(s) is considered conclusive and binding, and can be entered in a court of competent jurisdiction.
Prospective franchisees should carefully consider the implications of this arbitration clause, including the financial responsibility for their own legal and arbitration costs. It would be prudent to consult with a legal professional to fully understand the potential risks and benefits before signing the franchise agreement.