Who is responsible for legal fees and costs in Craters & Freighters arbitration, and what is the exception?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
- The franchise agreement contains a covenant not to compete, which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
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- The franchise agreement requires arbitration if a dispute is not first resolved by mediation. The arbitration will occur in the city of our then-current headquarters (currently, Golden, Colorado). All parties will be solely responsible for their own legal fees and costs and for their share of the arbitration process fees and costs, with the exception of any dispute of monies owed to Franchisor pursuant to Section 23.3.4 of the Franchise Agreement, in which case all of the costs will be borne by you if Craters & Freighters prevails. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedures Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
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- The franchise agreement requires application of the laws of the state of Colorado. This provision may not be enforceable under California law.
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- Section 31125 of the Franchise Investment Law requires us to give to you a franchise disclosure document approved by the Commissioner of Financial Protection & Innovation before we ask you to consider a material modification of your franchise agreement.
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- You must sign a general release of claims if you transfer your franchise. California Corporations Code Sections 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code Sections 31000 through 31516.) Business and Professions Code Section 200010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code Sections 20000 through 20043).
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- The franchise agreement provides for termination upon bankruptcy.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, in general, each party in an arbitration proceeding is responsible for their own legal fees and costs. They are also responsible for their share of the arbitration process fees and costs.
However, there is an exception to this rule. If the dispute involves amounts owed by the franchisee to Craters & Freighters or its affiliates, or if Craters & Freighters or the franchisee is required to enforce the agreement in a judicial or arbitration proceeding, the prevailing party is entitled to reimbursement of its costs and expenses. This includes reasonable arbitrators' fees, accounting, and legal fees. These costs can be incurred prior to, in preparation for, or in contemplation of filing any written demand, claim, action, hearing, or proceeding to enforce the obligations of the agreement.
In the context of California law, the FDD notes that all parties will be solely responsible for their own legal fees and costs and for their share of the arbitration process fees and costs, with the exception of any dispute of monies owed to Craters & Freighters pursuant to Section 23.3.4 of the Franchise Agreement, in which case all of the costs will be borne by you if Craters & Freighters prevails. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws to any provisions of a franchise agreement restricting venue to a forum outside the State of California.