Under what circumstances is arbitration required for disputes between Cinnaholic franchisor and developer?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
EXCEPT TO THE EXTENT FRANCHISOR SEEKS INJUNCTIVE OR OTHER EQUITABLE RELIEF TO ENFORCE PROVISIONS OF THIS AGREEMENT, AND EXCEPT FOR CONTROVERSIES, CLAIMS OR DISPUTES BASED ON DEVELOPER'S FAILURE TO PAY ANY FEES DUE HEREUNDER WHEN DUE; DEVELOPER'S VIOLATION OF ANY HEALTH OR SAFETY LAW; OR DEVELOPER'S USE OF THE MARKS, ALL CONTROVERSIES, CLAIMS OR DISPUTES BETWEEN FRANCHISOR AND DEVELOPER ARISING OUT OF OR RELATING TO (I) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN FRANCHISOR AND DEVELOPER, (II) THE RELATIONSHIP BETWEEN DEVELOPER AND FRANCHISOR, OR (III) THE SCOPE AND VALIDITY OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN FRANCHISOR AND DEVELOPER (INCLUDING THE SCOPE AND VALIDITY OF THE ARBITRATION OBLIGATIONS UNDER THIS SECTION, WHICH FRANCHISOR AND DEVELOPER ACKNOWLEDGE IS TO BE DETERMINED BY AN ARBITRATOR AND NOT A COURT) SHALL BE DETERMINED BY ARBITRATION WITH THE AMERICAN ARBITRATION ASSOCIATION ("AAA") AT THE OFFICE OF THE AAA CLOSEST TO FRANCHISOR'S PRINCIPAL EXECUTIVE OFFICE ON THE DATE OF SUBMISSION OF THE MATTER TO THE AAA.
SUCH ARBITRATION SHALL BE CONDUCTED BEFORE ONE ARBITRATOR CHOSEN IN ACCORDANCE WITH AAA COMMERCIAL ARBITRATION RULES.
THE DECISION OF THE ARBITRATOR SHALL BE FINAL AND BINDING UPON ALL PARTIES CONCERNED.
SUCH DECISION SHALL BE RENDERED WITHIN 30 DAYS OF THE CLOSE OF THE ARBITRATION HEARING RECORD.
THE ARBITRATION PROCEEDING SHALL BE CONDUCTED AT THE OFFICE OF THE AAA CLOSEST TO FRANCHISOR'S PRINCIPAL EXECUTIVE OFFICE ON THE DATE OF SUBMISSION OF THE
MATTER TO THE AAA.
IN ANY ARBITRATION PROCEEDING, FRANCHISOR AND DEVELOPER AGREE THAT EACH MUST SUBMIT OR FILE ANY CLAIM WHICH WOULD CONSTITUTE A COMPULSORY COUNTERCLAIM (AS DEFINED BY THE THEN CURRENT RULE 13 OF THE FEDERAL RULES OF CIVIL PROCEDURE) WITHIN THE SAME PROCEEDING AS THE CLAIM TO WHICH IT RELATES.
ANY CLAIM NOT SUBMITTED OR FILED AS REQUIRED IS FOREVER BARRED.
THE ARBITRATOR MAY NOT CONSIDER ANY SETTLEMENT DISCUSSIONS OR OFFERS THAT MIGHT HAVE BEEN MADE BY EITHER PARTY.
FRANCHISOR RESERVES THE RIGHT, BUT HAS NO OBLIGATION, TO ADVANCE DEVELOPER'S SHARE OF THE COSTS OF ANY ARBITRATION PROCEEDING IN ORDER FOR SUCH ARBITRATION PROCEEDINGS TO TAKE PLACE AND BY DOING SO WILL NOT BE DEEMED TO HAVE WAIVED OR RELINQUISHED FRANCHISOR'S RIGHT TO SEEK THE RECOVERY OF THOSE COSTS IN ACCORDANCE WITH SECTION 22.
THE ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL, NOT A CLASS-WIDE BASIS, AND THE ARBITRATION PROCEEDING MAY NOT BE CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING BETWEEN FRANCHISOR AND ANY OTHER PERSON.
NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY IN THIS SECTION OR SECTION 24, IF ANY COURT OR ARBITRATOR DETERMINES THAT ALL OR ANY PART OF THE PRECEDING SENTENCE IS UNENFORCEABLE WITH RESPECT TO A DISPUTE THAT OTHERWISE WOULD BE SUBJECT TO ARBITRATION UNDER THIS SECTION 21.2, THEN ALL PARTIES AGREE THAT THIS ARBITRATION CLAUSE SHALL NOT APPLY TO THAT DISPUTE AND THA
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, arbitration is generally required for disputes between the franchisor and the developer, but there are exceptions. Specifically, unless Cinnaholic seeks injunctive or other equitable relief to enforce the agreement, or if the dispute involves the developer's failure to pay fees when due, violation of health or safety laws, or unauthorized use of Cinnaholic's marks, all other controversies, claims, or disputes must be determined by arbitration. This includes disputes arising out of the Development Agreement or any other agreement between Cinnaholic and the developer, the relationship between them, or the scope and validity of these agreements, including the arbitration obligations themselves.
The arbitration will be conducted with the American Arbitration Association (AAA) at the office closest to Cinnaholic's principal executive office. A single arbitrator, chosen according to AAA commercial arbitration rules, will preside over the proceedings. The arbitrator's decision is final and binding, and must be rendered within 30 days of the close of the arbitration hearing record. Both Cinnaholic and the developer must submit any compulsory counterclaims within the same proceeding, or those claims will be permanently barred.
The arbitrator is not allowed to consider any settlement discussions or offers made by either party. Cinnaholic retains the right, but not the obligation, to advance the developer's share of the arbitration costs, without waiving its right to seek recovery of those costs later. The arbitration will be conducted on an individual basis and cannot be consolidated with any other arbitration proceeding between Cinnaholic and another person. However, if any court or arbitrator deems the prohibition on class-wide arbitration unenforceable, the arbitration clause will not apply to that specific dispute.