Who is responsible for legal fees and costs in a Craters & Freighters arbitration proceeding?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
- 23.3.2 Attorneys' Fees.
The parties to the arbitration proceeding(s) will be solely responsible for their own legal fees and costs.
Such parties will be responsible for their share of the arbitration process fees and costs, subject to Section 23.3.4 of this Agreement.
- 23.3.3 No Withholding or Offset.
Franchisee agrees, during the dispute resolution process set forth in this Section 23, that Franchisee will not withhold payment of any Royalty Fees, Marketing Fund Contributions, Insurance Payments, Technology Fees, or any other payments due to Franchisor or any Affiliate of Franchisor as required by Franchisor pursuant to this Agreement, the Operations Manuals, or otherwise.
- 23.3.4 Cost Responsibility.
If a claim for amounts owed by Franchisee to Franchisor or its affiliates is asserted in any judicial or arbitration proceeding or appeal thereof, or if Franchisor or Franchisee is required to enforce this Agreement in a judicial or arbitration proceeding or appeal thereof, the party prevailing in such proceeding will be entitled to reimbursement of its costs and expenses, including reasonable arbitrators' fees, accounting and legal fees, whether incurred prior to, in preparation for, or in contemplation of the filing of any written demand, claim, action, hearing, or proceeding to enforce the obligations of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, in most arbitration proceedings, each party is responsible for their own legal fees and costs. This means that the franchisee and Craters & Freighters will each pay their respective attorneys and any other legal expenses they incur during the arbitration. Additionally, both parties will be responsible for their share of the arbitration process fees and costs. This arrangement is typical in many franchise agreements, as it ensures that both parties bear the burden of their legal representation and the costs associated with the arbitration process.
However, there is an exception to this rule. If the arbitration involves a claim for amounts owed by the franchisee to Craters & Freighters or its affiliates, or if either party is required to enforce the Franchise Agreement through arbitration, the prevailing party will be entitled to reimbursement of their costs and expenses. This includes reasonable arbitrators' fees, accounting, and legal fees. This provision applies whether these costs were incurred before, during, or in anticipation of the arbitration proceeding.
For a prospective Craters & Freighters franchisee, this means that while you will generally be responsible for your own legal costs in an arbitration, you could be required to cover Craters & Freighters's legal fees if they prevail in a dispute over amounts you owe them or in enforcing the agreement. Conversely, if you prevail in such a dispute, Craters & Freighters would be responsible for covering your legal costs. This creates a financial risk for franchisees, as legal and arbitration costs can be substantial. It is important to understand these potential costs and to factor them into your financial planning when considering a Craters & Freighters franchise.