In the event of arbitration or litigation involving Jersey Mikes, who is responsible for covering the costs and expenses of the prevailing party?

According to Jersey Mikes's 2025 Franchise Disclosure Document, in arbitration, the arbitrator will award the prevailing party their attorneys' fees and costs. This means that if a franchisee wins an arbitration case against Jersey Mikes, Jersey Mikes will be responsible for covering the franchisee's legal fees and costs. Conversely, if Jersey Mikes prevails, the franchisee would be responsible for Jersey Mike's legal expenses.

This arrangement incentivizes both parties to present strong cases and potentially encourages settlement to avoid the risk of covering the opposing party's expenses. However, the arbitrator cannot award punitive or exemplary damages to either party, except for claims arising from the franchisee's obligation to indemnify Jersey Mikes for third-party claims or for claims for treble damages in appropriate cases under the U.S. Trademark Act of 1946.

Mediation, which is required before arbitration, operates differently. The fees and expenses of the American Arbitration Association (AAA) or other administrator, and the mediator's fee, are shared equally among the parties. Each party bears its own attorneys' fees and other costs incurred in connection with the mediation, regardless of the outcome. This encourages a collaborative approach to dispute resolution during mediation, as each party is responsible for their own legal costs, irrespective of the mediator's evaluation.