Does a violation of the restrictive covenants in the Fitstop Franchise Agreement require mediation?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
The Parties will not be required to first attempt to mediate a controversy, dispute, or claim through mediation as set forth in this Section 19.2 ifsuch controversy, dispute, or claim concerns an allegation that a Party has violated (or threatens to violate, or poses an imminent risk of violating): (i) any federally protected intellectual property rights in the Proprietary Marks, System, or in any Confidential Information or other intellectual property rights associated with the same; (ii) any of the restrictive covenants contained in this Agreement; and (iii) any of Franchisee's payment obligations under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, mediation is not required for disputes involving violations of the restrictive covenants within the Franchise Agreement. Fitstop reserves the right to pursue other legal remedies, such as injunctive relief, without first engaging in mediation. This means that if Fitstop believes a franchisee is violating the restrictive covenants, such as those related to competition or confidential information, Fitstop can immediately seek a court order to stop the violation.
This approach allows Fitstop to act quickly to protect its interests and prevent potential damage to its brand or business. For a prospective franchisee, this means that any violation of the restrictive covenants could lead to immediate legal action without the opportunity to resolve the issue through mediation. The franchisee acknowledges that violating these covenants could cause irreparable harm to Fitstop, justifying immediate injunctive relief.
Fitstop's right to bypass mediation is not limited to restrictive covenants; it also applies to disputes involving federally protected intellectual property rights and the franchisee's payment obligations. This comprehensive exclusion from mandatory mediation underscores the importance Fitstop places on protecting its intellectual property, enforcing restrictive covenants, and ensuring timely payments. Franchisees should be aware of these terms and understand the potential consequences of violating these specific provisions of the Franchise Agreement.
While mediation is not required for these specific violations, the FDD outlines an internal dispute resolution process that a franchisee must exhaust before pursuing other avenues of resolution. This involves bringing any claim or dispute to Fitstop's management and making commercially reasonable efforts to settle the dispute internally before involving a third-party mediator or other adjudicating party. This internal process, however, does not prevent Fitstop from seeking immediate injunctive relief for violations of restrictive covenants, intellectual property rights, or payment obligations.