Who is responsible for the costs of arbitration for a Cinnaholic franchise dispute?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement and the Development Agreement each require binding arbitration. The arbitration will occur at the office of the American Arbitration Association closest to our principal executive office with each party responsible for its own costs.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in the event of binding arbitration, each party is responsible for covering their own costs. The arbitration will take place at the American Arbitration Association office nearest to Cinnaholic's main office. This means that a franchisee entering into a dispute with Cinnaholic through arbitration will need to budget for their own legal and associated costs, regardless of the outcome of the arbitration.
This arrangement, where each party bears their own arbitration costs, is fairly common in franchising. It differs from court litigation, where the prevailing party may sometimes recover legal fees from the losing party. The fact that arbitration occurs near Cinnaholic's main office could potentially create a cost disadvantage for franchisees located further away, as they would incur additional travel expenses.
It is important for prospective Cinnaholic franchisees to consider the implications of this clause. They should factor in potential arbitration costs when assessing the overall financial risks and benefits of investing in a Cinnaholic franchise. Franchisees may want to seek legal counsel to fully understand their rights and obligations under the Franchise Agreement, particularly concerning dispute resolution.