What rules govern the mediation process for Spray Net disputes?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
At Franchisor's option, all claims or disputes between Franchisee and Franchisor (or its affiliates) arising out of, or in any way relating to, this Agreement or any other agreement by and between Franchisee and Franchisor (or its affiliates), or any of the parties' respective rights and obligations arising from such agreement, which are not first resolved through the internal dispute resolution procedure sent forth in Section 21(B) above, will be submitted first to mediation to take place in the County of New Castle, Delaware, under the auspices of the American Arbitration Association ("AAA"), in accordance with AAA's Commercial Mediation Rules then in effect.
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, if internal dispute resolution fails, disputes may proceed to mediation at Spray Net's option. The mediation will occur in New Castle County, Delaware, under the American Arbitration Association (AAA) Commercial Mediation Rules. Before starting legal action, a franchisee must send Spray Net a detailed notice of the claim, and Spray Net has 30 days to decide whether to submit the dispute to mediation.
A franchisee cannot take legal action unless Spray Net declines mediation or the mediation is terminated, either by the mediator or by Spray Net. Spray Net can enforce its right to mediation. Each party pays their own mediation costs, and mediator fees are split equally between Spray Net and the franchisee. The agreement to mediate survives the termination or expiration of the Franchise Agreement.
However, mediation is not required for disputes involving alleged violations of federally protected intellectual property rights, restrictive covenants in the agreement, or the franchisee's payment obligations. This means Spray Net can immediately pursue legal action to protect its trademarks, system, confidential information, or to enforce non-compete clauses or collect unpaid fees, without first going through mediation. This is a common exception in franchise agreements, allowing franchisors to quickly address critical issues that could severely impact the brand or financial stability.