Who bears the costs of arbitration for a Dryject franchise dispute?

According to Dryject's 2025 Franchise Disclosure Document, the costs and expenses of arbitration, which include compensation and expenses of the arbitrator, are to be borne by the non-prevailing party. This means that in a dispute that goes to arbitration, the party that does not win the case will be responsible for covering these costs.

For a prospective Dryject franchisee, this has significant financial implications. If a franchisee enters into a dispute with Dryject and the arbitrator rules against them, the franchisee will have to pay not only their own legal fees but also the arbitrator's compensation and expenses. This could amount to a substantial sum, depending on the complexity and length of the arbitration process. Therefore, it is crucial for franchisees to carefully assess the merits of their case before pursuing arbitration.

It is also important to note that the arbitration proceedings will be conducted before a single arbitrator selected in accordance with the American Arbitration Association (AAA) Rules. This arbitrator must have been actively engaged in the practice of law for at least ten years and possess franchise law experience. The arbitration will take place in the city and state where Dryject maintains its principal place of business, which is currently Hatboro, Pennsylvania. This location may add travel costs for the franchisee, depending on their location.

This arrangement is fairly standard in the franchise industry, where arbitration clauses are common for dispute resolution. However, the financial risk associated with potentially bearing all arbitration costs underscores the importance of thorough due diligence, seeking legal counsel, and attempting to resolve disputes through negotiation or mediation before resorting to arbitration. Mediation costs, unlike arbitration, are split equally between the parties according to subsection 37(a)(ii).