Under what circumstances are the parties NOT required to attempt mediation for a Spray Net dispute?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
ch 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.
- D. Injunctive Relief.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, mediation is not required for certain types of claims. Specifically, if a dispute involves a franchisee's past due payment obligations, or any actual or threatened disclosure/misuse of Spray Net's confidential information, the parties are not obligated to enter mediation. Similarly, mediation is not required if there is an actual or threatened violation of Spray Net's rights in its Proprietary Marks, System, or other trade secrets.
Additionally, the mandatory mediation clause does not apply to disputes regarding any of the restrictive covenants contained in the Franchise Agreement or the Guaranty. Finally, any claims arising out of or related to fraud or misrepresentation by the franchisee, or the franchisee's insolvency, are also exempt from the mediation requirement. These exceptions allow Spray Net to directly pursue legal action in cases where the potential damage to the brand or financial stability is significant or time-sensitive.
This means that a Spray Net franchisee could face immediate legal action, without the opportunity for mediation, if they are delinquent in their payments, misusing confidential information, infringing on Spray Net's trademarks, violating restrictive covenants, or found to have committed fraud. This is a fairly standard clause in franchise agreements, as franchisors typically want to reserve the right to immediately protect their brand and revenue streams.
Prospective Spray Net franchisees should carefully consider these exceptions and understand that certain actions on their part could lead to immediate legal action from Spray Net, without the initial step of mediation. Franchisees should ensure they fully understand their obligations regarding payments, confidential information, intellectual property, and adherence to restrictive covenants to avoid such situations.