Who bears the legal costs in a Learningrx arbitration?

According to Learningrx's 2025 Franchise Disclosure Document, in the event of an arbitration, both parties are responsible for covering their own legal costs and expenses. This is explicitly stated in Section 18.7 of the franchise agreement, which outlines the allocation of legal costs. This clause deviates from the standard practice in legal proceedings where the prevailing party may recover legal fees from the losing party. However, this cost-sharing arrangement applies specifically to arbitration and not to legal proceedings in a court of law.

This arrangement means that a Learningrx franchisee entering into arbitration with the franchisor must be prepared to pay their own legal fees, regardless of the outcome of the arbitration. This can be a significant financial consideration, as legal costs can quickly escalate during arbitration proceedings. Franchisees should factor this potential expense into their financial planning and understand that even if they win the arbitration, they will not be reimbursed for their legal expenses.

However, it is important to note that the Multi-State Addendum includes a modification for California franchisees. For franchisees in California, the FDD states that the arbitration will occur in Colorado and the costs will be borne by both parties. This suggests that while each party is responsible for their own legal costs, there may be other arbitration costs that are shared. Prospective franchisees should seek clarification from Learningrx regarding the specific types of costs that are shared in arbitration, as well as the potential financial implications.