Can an arbitration against Cream be brought on behalf of a franchisee by any association or agent?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
WE AND YOU AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL BASIS AND THAT AN ARBITRATION PROCEEDING BETWEEN US AND ANY OF OUR AFFILIATES, OR OUR AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS, AND EMPLOYEES, ON THE ONE HAND, AND YOU (OR YOUR OWNERS, GUARANTORS, AFFILIATES, AND EMPLOYEES), ON THE OTHER HAND, MAY NOT BE: (I) CONDUCTED ON A CLASS-WIDE BASIS; (II) COMMENCED, CONDUCTED, OR CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING; (III) JOINED WITH ANY SEPARATE CLAIM OF AN UNAFFILIATED THIRD-PARTY; OR (IV) BROUGHT ON YOUR BEHALF BY ANY ASSOCIATION OR AGENT. Notwithstanding the foregoing, if any court or arbitrator determines that all or any part of the preceding sentence is unenforceable with respect to a dispute, controversy, or claim that otherwise would be subject to arbitration under this Section, then all parties agree that this arbitration clause shall not apply to that dispute, controversy, or claim and that such dispute, controversy, or claim shall be resolved in a judicial proceeding in accordance with the dispute resolution provisions of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, arbitration proceedings between Cream and its franchisees must be conducted on an individual basis. Specifically, an arbitration proceeding cannot be brought on behalf of a franchisee by any association or agent. This means that franchisees must pursue arbitration claims individually and cannot be represented by a collective entity.
This restriction on class-wide or representative arbitration is a significant point for prospective Cream franchisees. It prevents franchisees from joining together to pursue claims against Cream, potentially increasing the cost and complexity of resolving disputes. Franchisees need to be aware that they will bear the full burden of their legal costs if they choose to arbitrate individually.
However, the FDD also states that if a court or arbitrator determines that the prohibition on class-wide or representative arbitration is unenforceable, then the agreement to arbitrate will not apply, and the dispute will be resolved in a judicial proceeding. This provides a potential avenue for franchisees to pursue collective action if the individual arbitration requirement is deemed invalid.
Cream's requirement for individual arbitration is not uncommon in franchising, as franchisors often seek to avoid the complexities and potential costs associated with class-action lawsuits or representative arbitrations. Prospective franchisees should carefully consider the implications of this provision and consult with legal counsel to understand their rights and options for dispute resolution.