Are disputes regarding restrictive covenants in the Craters & Freighters agreement required to be submitted to mediation?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
ation. The parties hereto will have sixty (60) days to reach a settlement; such sixty (60) day period will begin on the date that Franchisee has submitted such claim to the AAA. Notwithstanding the foregoing, for the sake of clarity, any controversy, dispute, or claim concerning the following will not be required to be submitted to mediation: (i) any federally protected intellectual property rights in the Marks, the System, or in any Trade Secrets, Confidential Information, or other confidential information; (ii) any of the restrictive covenants contained in this Agreement; and (iii) any of Franchisee's payment obligations under this Agreement.
- 23.3 Arbitration. In the event any dispute involving a Claim is not resolved through mediation within the sixty (60) day period referenced in Section 23.2 above, Franchisee must submit such Claim to arbitration in Jefferson County or Denver County, State of Colorado, in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award may be entered in any court having jurisdiction thereof. The arbitration will be held before, and decided by, a panel of three (3) arbitrators. Franchisor will select one (1) arbitrator, Franchisee will select one (1) arbitrator, and those two (2) arbitrators will then select the third arbitrator.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, disputes regarding restrictive covenants in the Franchise Agreement are specifically excluded from mandatory mediation. While Craters & Freighters requires mediation for many types of disputes, this exclusion means that the franchisor can directly pursue other legal avenues, such as arbitration or court action, to enforce these covenants without first attempting to resolve the issue through mediation. This applies to disputes concerning non-competition and non-solicitation agreements.
This policy has significant implications for a prospective Craters & Freighters franchisee. If a franchisee violates a restrictive covenant, such as by engaging in a competitive business during or after the franchise term, Craters & Freighters can immediately seek legal remedies without the delay and expense of mediation. This could involve seeking an injunction to stop the franchisee's actions or pursuing damages for any harm caused by the violation.
However, it is important to note that Craters & Freighters retains the right to seek injunctive relief in a court of competent jurisdiction for any claim, provided that the parties contemporaneously submit their dispute for mediation and arbitration on the merits. This suggests that while mediation is not a prerequisite for enforcing restrictive covenants, it may still be required concurrently with other legal actions under certain circumstances. Franchisees should be aware of this provision and understand the potential legal ramifications of violating any restrictive covenants in the agreement.