If a Chem Dry franchisee initiates arbitration of a counterclaim during litigation, what happens to the litigation?

According to Chem Dry's 2024 Franchise Disclosure Document, if a franchisee is the defendant in a litigation initiated by Chem Dry and chooses to initiate arbitration of any counterclaim or the underlying dispute, the litigation must be dismissed. Following the dismissal, the dispute will be resolved through arbitration.

This provision means that while Chem Dry can initially pursue monetary claims for liquidated amounts through litigation, the franchisee has the option to shift the dispute resolution method to arbitration. This can be a strategic decision for a franchisee depending on the nature of the dispute, the perceived advantages of arbitration versus litigation, and the associated costs.

The FDD specifies that Tennessee law applies to these proceedings, and the arbitration will take place in Nashville, Tennessee, subject to state law. This is a common practice in franchising, where the franchisor often designates a specific location and governing law for dispute resolution to ensure consistency and predictability. Prospective franchisees should carefully consider the implications of these clauses, as they can impact the cost and convenience of resolving disputes with Chem Dry.