Does the agreement to mediate Spray Net disputes survive termination or expiration of the franchise agreement?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
Before commencing any legal action against Franchisor or its affiliates with respect to any such claim or dispute, Franchisee must submit a notice to Franchisor, which specifies, in detail, the precise nature and grounds of such claim or dispute.
Franchisor will have a period of thirty (30) days following receipt of such notice within which to notify Franchisee as to whether Franchisor or its affiliates elects to exercise its option to submit such claim or dispute to mediation.
Franchisee may not commence any action against Franchisor or its affiliates with respect to any such claim or dispute in any court unless Franchisor fails to exercise its option to submit such claim or dispute to mediation, or such mediation proceedings have been terminated either: (i) as the result of a written declaration of the mediator(s) that further mediation efforts are not worthwhile; or (ii) as a result of a written declaration by Franchisor.
Franchisor's rights to mediation, as set forth herein, may be specifically enforced by Franchisor.
Each party will bear its own cost of mediation and Franchisor and Franchisee will share mediator fees equally.
This agreement to mediate will survive any termination or expiration of this Agreement.
The parties will not be required to first attempt to mediate a controversy, dispute, or claim through mediation as set forth in this Section 21(C) if such controversy, dispute, or claim concerns an allegation that a party has violated (or threatens to violate, or poses an imminent risk of violating): (i) any federally protected intellectual property rights in the Proprietary Marks, the System, or in any Confidential Information or other confidential information; (ii) any of the restrictive covenants contained in this Agreement; and (iii) any of Franchisee's payment obligations under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, the agreement to mediate disputes between the franchisee and Spray Net survives any termination or expiration of the Franchise Agreement. Specifically, before commencing any legal action against Spray Net, a franchisee must submit a notice detailing the claim or dispute. Spray Net then has 30 days to decide whether to submit the claim to mediation. The franchisee cannot take action in court unless Spray Net does not choose mediation, or the mediation is terminated by the mediator or Spray Net. Each party bears its own costs, and they share the mediator's fees equally.
However, there are exceptions to this mediation requirement. Mediation is not required for claims involving a franchisee's past due payment obligations, the actual or threatened disclosure or misuse of Spray Net's confidential information, or the actual or threatened violation of Spray Net's rights in its Proprietary Marks or System. Additionally, disputes related to any restrictive covenants in the Franchise Agreement or claims arising from fraud or misrepresentation by the franchisee are also exempt from mandatory mediation.
This means that even after the franchise agreement ends, the franchisee may still be required to participate in mediation if Spray Net chooses it, except for specific types of disputes. This could save both parties time and money compared to going straight to court. However, franchisees should be aware of the types of claims that are excluded from this mediation requirement, as those could proceed directly to legal action.