Under what circumstances does the Cream arbitration clause not apply to a dispute?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
WE AND YOU AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL BASIS AND THAT A PROCEEDING REQUIRED UNDER THIS SECTION TO BE SUBMITTED TO ARBITRATION MAY NOT BE: (1) CONDUCTED ON A CLASS-WIDE BASIS; (2) COMMENCED, CONDUCTED OR CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING; (3) JOINED WITH ANY SEPARATE CONTROVERSY, DISPUTE OR CLAIM OF AN UNAFFILIATED THIRD-PARTY; OR (4) 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, the arbitration clause may not apply if a court or arbitrator determines that the clause's restrictions on the scope of arbitration are unenforceable. Specifically, the restrictions prevent arbitrations from being conducted on a class-wide basis, being consolidated with other proceedings, involving unaffiliated third-party claims, or being brought by an association or agent on the franchisee's behalf.
In practical terms, this means that if a franchisee attempts to bring a class-action claim against Cream, or consolidate their arbitration with other franchisees' claims, Cream can enforce the arbitration agreement to prevent this. However, if a court or arbitrator finds these restrictions unenforceable, the dispute will be resolved in a judicial proceeding instead of arbitration. This could occur if the restrictions are deemed to violate state or federal law, or if they are found to be unconscionable.
This provision aims to ensure that disputes are handled individually and efficiently, preventing large, complex arbitrations. However, it also provides an exception if the restrictions are deemed unenforceable, allowing for judicial resolution in such cases. Prospective franchisees should understand the implications of this clause and consider the potential circumstances under which it might not apply, as this could affect their ability to pursue certain types of claims against Cream.