Does the Cream franchise agreement require disputes regarding the scope or validity of the arbitration provision itself to be determined by an arbitrator?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
F. ARBITRATION.
We and you agree that all controversies, disputes, or claims between us or any of our affiliates, and our and their respective owners, officers, directors, agents, and employees, on the one hand, and you and your owners, guarantors, affiliates, and employees, on the other hand, arising out of or related to: (1) this Agreement or any other agreement between you (or any of your owners) and us (or any of our affiliates); (2) our relationship with you; (3) the scope or validity of this Agreement or any other agreement between you (or any of your owners) and us (or any of our affiliates) or any provision of any of such agreements (including the validity and scope of this arbitration provision, which is to be determined by an arbitrator, not a court); or (4) any System Standard, must be submitted for binding arbitration, on demand of either party, to the American Arbitration Association (the "AAA"). The arbitration proceedings will be conducted by one arbitrator and, except as this Section otherwise provides, according to the AAA's then-current Commercial Arbitration Rules. All proceedings will be conducted at a suitable location chosen by the arbitrator that is within 50 miles of our or, as applicable, our successor's or assign's then-current principal place of business (currently, Columbus, Ohio). All matters relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.). The interim and final awards of the arbitrator shall be final and binding upon each party, and judgment upon the arbitrator's awards may be entered in any court of competent jurisdiction.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, disputes over the scope or validity of the arbitration agreement will be determined by an arbitrator, not a court. This requirement extends to any disputes arising from the franchise agreement or the franchisee's relationship with Cream.
This means that a franchisee cannot take Cream to court over a disagreement about whether the arbitration clause itself is valid or applies to a particular situation. Instead, an arbitrator, following the rules of the American Arbitration Association (AAA), will make that initial determination. The arbitration will be conducted by a single arbitrator at a location within 50 miles of Cream's principal place of business, which is currently Columbus, Ohio.
This clause is significant because it mandates that even the fundamental question of whether a dispute should be in arbitration is decided within the arbitration process itself. Franchisees should understand that they are agreeing to have an arbitrator, rather than a judge, decide on the applicability and enforceability of the arbitration provision. This is a common practice in franchise agreements, intended to streamline dispute resolution and avoid lengthy court battles. All arbitration matters are governed by the Federal Arbitration Act.
Cream specifies that the arbitrator's decision is final and binding, and can be enforced in any court with jurisdiction. The arbitrator can award any relief deemed proper, including monetary damages, interest, and attorney's fees, but cannot invalidate Cream's trademarks or award punitive damages. This ensures that disputes are resolved through arbitration, maintaining efficiency and cost-effectiveness, while also limiting the scope of potential awards.