Does the Mrcool franchise agreement require non-binding mediation before arbitration?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
7.6 CHOICE OF LAW, NON-BINDING MEDIATION, BINDING ARBITRATION, AND CONSENT TO JURISDICTION
(1) Non-Binding Mediation – Franchisee and Franchisor agree that before either party may bring any action, dispute and/or controversy arising from or related to this Agreement and/or the franchise relationship between Franchisor and Franchisee in arbitration, the parties must first mediate the dispute through non-binding mediation. Mediation shall be non-binding and shall be conducted by the American Arbitration Association ("AAA") in accordance with the AAA's then current rules for the mediation of commercial disputes. All mediation proceedings shall be conducted in Graves County, Kentucky or, if a mediator is not available in Graves County, Kentucky then at a suitable location selected by the mediator that is located closest to Graves County, Kentucky. Mediation shall be conducted by one mediator and if Franchisor and Franchisee cannot agree on a mediator then the mediator shall be selected by the AAA. Mediation shall be conducted within 45 days of the AAA's designation and/or acknowledgment of the selected mediator or such longer period as may be agreed to between Franchisor and Franchisee in writing signed by each respective party. Franchisor and Franchisee shall each be responsible for their own costs associated with mediation and Franchisor and Franchisee shall each be responsible for and shall each pay 50% of the mediator's fee and the AAA's mediation fees.
Notwithstanding the preceding paragraph, Franchisor and Franchisee agree this Sub-Section 7.6(1) and, thereby, the prerequisite requirement of non-binding mediation, shall not, at Franchisor's election, apply to: (a) any claims or disputes related to or concerning a breach of this Agreement by Franchisee that, under the terms of this Agreement, may entitle Franchisor to the award of injunctive relief; and/or (b) claims by either Franchisor or Franchisee under this Agreement that relates to either Franchisor's or Franchisee's failure to pay fees or other monetary obligations due under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to Mrcool's 2025 Franchise Disclosure Document, the franchise agreement generally requires non-binding mediation before either party can initiate arbitration. Specifically, before bringing any action, dispute, or controversy related to the agreement or the franchise relationship to arbitration, both Mrcool and the franchisee must first attempt to mediate the dispute through non-binding mediation. This mediation is to be conducted by the American Arbitration Association (AAA) following its rules for commercial disputes. The mediation proceedings will take place in Graves County, Kentucky, or a location closest to it selected by the mediator if a mediator is unavailable in Graves County.
The mediation must occur within 45 days of the AAA's designation of the mediator, unless both parties agree to a longer period in writing. Both Mrcool and the franchisee are responsible for their own costs associated with the mediation. They will each pay 50% of the mediator's fee and the AAA's mediation fees. This requirement for non-binding mediation is a fairly standard practice in franchising, as it provides an opportunity for resolving disputes amicably and potentially avoiding the more costly and time-consuming process of arbitration.
However, there are exceptions to this mediation requirement. Mrcool can elect to waive the non-binding mediation requirement for claims or disputes concerning a breach of the agreement by the franchisee that would entitle Mrcool to injunctive relief. Mrcool can also elect to waive the non-binding mediation requirement for claims by either Mrcool or the franchisee under the agreement that relates to either Mrcool's or the franchisee's failure to pay fees or other monetary obligations due under the agreement. This means that Mrcool retains the option to proceed directly to arbitration or other legal action in certain situations, particularly those involving breaches of contract or failure to pay required fees.