Does the Mrcool franchise agreement's mediation requirement apply to claims related to a breach of the agreement entitling the Franchisor to injunctive relief?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
(2) Arbitration – Subject to the prerequisite requirements of non-binding mediation as set forth in Sub-Section 7.6(1), and, except, at Franchisor's election, as to 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, Franchisor and Franchisee agree that all disputes, controversies, and claims, arising from and/or related to this Agreement, the relationship between Franchisor and Franchisee, the System, and/or the validity of this Agreement and/or the Ancillary Agreements, shall be submitted, on demand of either Franchisor or Franchisee, to the AAA for binding arbitration. Arbitration shall be conducted by one arbitrator in accordance with the AAA's then current rules for commercial disputes, except as may be otherwise required in this Section 7.6. All arbitration proceedings shall be conducted in Graves County, Kentucky or, if suitable AAA facilities are not available in Graves County, Kentucky then at a suitable AAA location selected by the arbitrator that is located closest to Graves County, Kentucky.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to the 2025 Mrcool Franchise Disclosure Document, the requirement for non-binding mediation does not automatically apply to claims related to a breach of the agreement that would entitle Mrcool to injunctive relief. Mrcool has the option to elect not to participate in mediation for these specific types of claims. This means that Mrcool can directly pursue other legal avenues, such as arbitration or litigation, without first attempting to resolve the dispute through mediation.
This provision is significant for a prospective Mrcool franchisee because it outlines a specific exception to the standard dispute resolution process. If Mrcool believes a franchisee has breached the agreement in a way that causes immediate and irreparable harm, justifying injunctive relief, Mrcool can bypass mediation. This could expedite the resolution of critical issues, such as protecting Mrcool's brand or proprietary information.
However, it's important to note that this election is at Mrcool's discretion. The franchisee does not have the same option to bypass mediation. This asymmetry in the dispute resolution process is a factor a potential franchisee should consider. While it may benefit Mrcool by allowing quicker action in certain situations, it could potentially disadvantage the franchisee by limiting their initial recourse to mediation in similar circumstances.
Furthermore, the FDD specifies that even with this exception to mediation, all disputes, with the stated exception, may be submitted to the American Arbitration Association (AAA) for binding arbitration, on demand of either Mrcool or the franchisee. This arbitration will be conducted by a single arbitrator in accordance with the AAA's rules for commercial disputes and will take place in Graves County, Kentucky, or a suitable AAA location closest to Graves County.