Where will arbitration occur under the Mrcool Franchise Agreement, and who bears the costs of arbitration?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
In any mediation or arbitration involving a franchise purchased in Washington, the mediation or arbitration site shall be either in the State of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation or as determined by the arbitrator or mediator.
Franchisee agrees that in the event that an arbitrator in any arbitration proceeding and/or, a court of competent jurisdiction shall issue an award, judgment, decision and/or order finding, holding and/or declaring Franchisee's breach of this Agreement than Franchisor shall also be entitled to the recovery of all reasonable attorney fees, costs and expenses associated with and/or related to such arbitration and/or litigation. Said fees, costs and expenses shall include, but not be limited to, attorney fees, arbitration fees, arbitrator fees, deposition expenses, expert witness fees and filing fees.
Article 18 of the Franchise Agreement is hereby amended by the addition of the following language: "Covenants requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota may not be enforceable in North Dakota."
Section 4 of the Illinois Franchise Disclosure Act Provides that any provision in a Franchise Agreement that designates jurisdiction or venue outside the State of Illinois is void. However, a Franchise Agreement may provide for arbitration in a venue outside Illinois.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to Mrcool's 2025 Franchise Disclosure Document, the location of arbitration depends on the state where the franchise is purchased. For a franchise purchased in Washington, the arbitration site will be in Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator. For franchisees in North Dakota, covenants requiring them to consent to the jurisdiction of courts outside of North Dakota may not be enforceable. For Illinois franchisees, any provision in the Franchise Agreement that designates jurisdiction or venue outside the State of Illinois is void; however, a Franchise Agreement may provide for arbitration in a venue outside Illinois.
Regarding attorney fees and expenses, if an arbitrator or a court finds that the franchisee has breached the agreement, Mrcool is entitled to recover all reasonable attorney fees, costs, and expenses associated with the arbitration or litigation. These include attorney fees, arbitration fees, arbitrator fees, deposition expenses, expert witness fees, and filing fees.
These stipulations regarding arbitration and legal costs have significant implications for prospective Mrcool franchisees. Franchisees in Washington have some assurance that arbitration will occur within their state, unless otherwise agreed. However, franchisees should be aware that if they are found to be in breach of the agreement, they may be responsible for Mrcool's legal costs, which could be substantial. Franchisees should consult with legal counsel to fully understand the arbitration process and potential financial risks.