Before bringing an action in court, what initial step must Buildingstars and the franchisee take to resolve a dispute?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Mediation. Before any party may bring an action in court for any controversy, dispute or claim between BUILDINGSTARS and FRANCHISEE arising from this Agreement or the franchise relationship set forth in this Agreement, the parties must first have a conference with each other to try to resolve the dispute. If this fails to bring about a resolution, the dispute will first be submitted to nonbinding mediation (the "Mediation") in St. Louis County, Missouri unless the parties mutually agree to another location. The Mediation shall be conducted in accordance with then-current AAA mediation rules (the "AAA Mediation Rules") except to the extent the AAA Mediation Rules differ from the terms of this Agreement, in which event the terms of this Agreement shall be applied. Notwithstanding the foregoing, the mediation does not have to be conducted under the AAA. BUILDINGSTARS and FRANCHISEE will select the mediator. If the parties cannot agree on the selection of a mediator, the mediation shall be conducted through the AAA who will make the selection of mediator using their rules and guidelines. The cost of the Mediation, including the mediator's fee and expenses, shall be paid by the FRANCHISEE. All negotiations and mediation proceedings (including without limitation, discovery conducted therein, as well as all statements and settlement offers made by either party or the mediator in connection with the Mediation) shall be strictly confidential, shall be considered as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and state rules of evidence, and shall not be admissible or otherwise used in connection with any court or arbitration proceeding for any purpose. The mediator may not be called as a witness in any court or arbitration proceeding for any purpose. If the parties, after a good faith effort to settle the dispute using Mediation, are unable to reach settlement, BUILDINGSTARS and FRANCHISEE agree that the dispute will be resolved according to the Sections below. Failure to submit the dispute to Mediation prior to commencing any litigation or arbitration proceeding shall be grounds for dismissal of the litigation or arbitration proceedings.
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, before either party can initiate a court action regarding a dispute arising from the franchise agreement or relationship, Buildingstars and the franchisee must first participate in a conference to attempt to resolve the dispute. If the initial conference does not lead to a resolution, the parties are then required to submit the dispute to nonbinding mediation in St. Louis County, Missouri, unless both parties agree to an alternative location.
The mediation process will follow the American Arbitration Association (AAA) mediation rules, but where those rules conflict with the franchise agreement, the agreement's terms will take precedence. While mediation does not have to be conducted through the AAA, Buildingstars and the franchisee will select the mediator. If they cannot agree on a mediator, the AAA will select one according to its rules and guidelines. The franchisee is responsible for covering the costs of the mediation, including the mediator's fees and expenses.
All negotiations and mediation proceedings are to be kept strictly confidential and are considered compromise and settlement negotiations, thus protected by the Federal Rules of Evidence and state rules of evidence. The mediator cannot be called as a witness in any subsequent court or arbitration proceeding. If mediation fails to produce a settlement after a good faith effort, Buildingstars and the franchisee will then proceed to resolve the dispute as outlined in further sections of the agreement.
Failure to engage in mediation before starting any litigation or arbitration can result in the dismissal of those proceedings, emphasizing the importance of attempting to resolve disputes through mediation first. This mandatory mediation clause is a fairly standard practice in franchising, intended to save both parties time and money by resolving disputes outside of court whenever possible.