Under what circumstances is mediation required for disputes between a Spray Net franchisee and franchisor?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
iples.
- B. Internal Dispute Resolution. Franchisee must first bring any claim or dispute between Franchisee and Franchisor to Franchisor's management, after providing notice as set forth in Section 21(G) of this Agreement, and make every effort to resolve the dispute internally. Franchisee must exhaust this internal dispute resolution procedure before Franchisee may bring Franchisee's dispute before a third party. This agreement to first attempt resolution of disputes internally shall survive termination or expiration of this Agreement.
- C. Mediation. 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.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, mediation is required at the franchisor's option for any claims or disputes between the franchisee and Spray Net (or its affiliates) that arise from the franchise agreement or any other agreement between the parties. This applies to disputes concerning the rights and obligations of both parties, but only after the internal dispute resolution procedure has been exhausted. The mediation will take place in New Castle County, Delaware, under the rules of the American Arbitration Association.
However, there are exceptions where mediation is not required. Spray Net and the franchisee are not required to mediate if the dispute involves allegations that a party has violated or threatens to violate federally protected intellectual property rights related to the Proprietary Marks, the System, confidential information, or other confidential information. Additionally, disputes concerning any restrictive covenants in the agreement or the franchisee's payment obligations are also exempt from mandatory mediation.
Before starting any legal action, the franchisee must first send a notice to Spray Net detailing the claim or dispute. Spray Net then has 30 days to decide whether to submit the issue to mediation. The franchisee cannot take legal action unless Spray Net declines mediation or the mediation is terminated, either by the mediator stating that further efforts are not worthwhile or by a written declaration from Spray Net. Spray Net retains the right to enforce the mediation clause specifically.
Each party is responsible for their own mediation costs, while the fees of the mediator are shared equally between Spray Net and the franchisee. This agreement to mediate survives any termination or expiration of the franchise agreement. This is a fairly standard clause in franchise agreements, intended to encourage less costly and time-consuming methods of dispute resolution before resorting to litigation.