Under what condition is the prevailing party in a Craters & Freighters judicial or arbitration proceeding entitled to reimbursement of costs and expenses?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
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, if a claim for amounts owed by the franchisee to Craters & Freighters or its affiliates is asserted in any judicial or arbitration proceeding, or if Craters & Freighters or the franchisee is required to enforce the Franchise Agreement in such a proceeding, the prevailing party is entitled to reimbursement of its costs and expenses. These costs include reasonable arbitrators' fees, accounting and legal fees, whether incurred before, during, or in anticipation of filing any written demand, claim, action, hearing, or proceeding to enforce the obligations of the agreement.
This means that if a Craters & Freighters franchisee ends up in a legal dispute with the franchisor over unpaid fees or the enforcement of the franchise agreement, the party that wins the case can recover their legal and other associated costs. This provision aims to protect both Craters & Freighters and its franchisees by ensuring that the party in the right is not unduly burdened by legal expenses.
It is important to note that this reimbursement extends to costs incurred even before a formal legal action is initiated, such as during the preparation or contemplation of filing a claim. This can include expenses for legal consultations, document preparation, and preliminary accounting work. This clause encourages both parties to act reasonably and in good faith, as the potential for cost recovery can influence the decision to pursue or defend against a claim.
However, franchisees should be aware that this cost recovery is contingent on prevailing in the legal or arbitration proceeding. If the franchisee loses the case, they will not only be responsible for their own costs but may also be required to cover Craters & Freighters' legal expenses. Therefore, it is crucial for franchisees to carefully assess the merits of their position and seek legal counsel before engaging in any dispute with the franchisor.