Does the agreement to mediate at Spray Net's option survive termination or expiration of the Franchise Agreement and Guaranty?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
This agreement to mediate atFranchisor's option shall survive any termination or expiration of the Franchise Agreement and this Guaranty.
- 4.1. Excepted Claims. The parties agree that mediation shall not be required with respect to any claim or dispute involving: (i) any of your payment obligations that are past due; (ii) the actual or threatened disclosure or misuse of Franchisor's Confidential Information; (iii) the actual or threatened violation of Franchisor's rights in, or misuse of, the Proprietary Marks, System or other trade secrets; (iv) any of the restrictive covenants contained in the Franchise Agreement or this Guaranty; or (v) any claims arising out of or related to fraud or misrepresentation by you, or your insolvency (collectively, the "Excepted Claims").
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 at Spray Net's option does indeed survive any termination or expiration of the Franchise Agreement and the Guaranty. This means that even after the franchise agreement ends, either through termination or expiration, the clause requiring mediation of disputes at Spray Net's discretion remains in effect.
This survival clause has significant implications for a prospective franchisee. It means that even after the business relationship has ended, Spray Net retains the right to insist on mediation before a franchisee can pursue legal action. This can potentially save both parties time and money by resolving disputes outside of court. However, it also means that a franchisee cannot immediately resort to litigation if a dispute arises post-termination; they must first go through mediation if Spray Net chooses that route.
However, there are exceptions to this mediation requirement. According to the FDD, 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, violation of Spray Net's rights in its trademarks or trade secrets, any restrictive covenants in the Franchise Agreement or Guaranty, or claims related to fraud or misrepresentation by the franchisee or their insolvency. In these specific cases, Spray Net or the franchisee can pursue other legal avenues without first engaging in mediation.
This clause is fairly typical in franchise agreements, as mediation is often seen as a cost-effective and efficient way to resolve disputes. Prospective franchisees should carefully consider the implications of this clause and understand the types of claims that are excluded from the mediation requirement.