Who bears the costs of arbitration in a dispute regarding the Stretch Zone Franchise Agreement?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Arbitration Costs. Each party will initially pay one-half of the costs of the filing fee and the fees for the arbitrator subject to reimbursement by the non-prevailing party to the prevailing party as determined by the arbitrator. If either party fails to pay its, his or her share of any arbitration fee or deposit, the other party who has paid its, his or her share may move for the arbitrator to issue an award on liability but the arbitrator will conduct a separate hearing to determine damages or other relief.
- (c) Prevailing Party. If any arbitration or legal action is permitted and instituted under Sections 17.3 or 17.4, the Prevailing Party is entitled to recover reasonable pre-institution and postinstitution attorneys' fees, court costs and all expenses even if not taxable as court costs (including all fees and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in the action or proceeding, in addition to any other relief that the party is entitled. Attorneys' fees include paralegal fees, administrative costs, investigative costs, costs of expert witnesses, court reporter fees, sales and use taxes, if any, and all other charges billed by the attorneys to the Prevailing Party.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the costs of arbitration are initially divided between the parties involved. Each party is responsible for paying one-half of the filing fee and the arbitrator's fees. However, this initial split is subject to change based on the arbitrator's decision. The arbitrator has the authority to determine which party is the prevailing party and can order the non-prevailing party to reimburse the prevailing party for the arbitration costs they initially paid.
If one party fails to pay their share of any arbitration fee or deposit, the other party has the option to pay the full amount. In this case, the party who paid the full amount can request the arbitrator to issue an award on liability. The arbitrator will then conduct a separate hearing to determine damages or other relief. This ensures that the arbitration process can continue even if one party is unwilling or unable to meet their financial obligations.
Furthermore, if any arbitration or legal action is permitted and initiated, the prevailing party is entitled to recover reasonable attorneys' fees, court costs, and all expenses incurred in the action or proceeding. This includes fees and expenses related to arbitration, appellate, bankruptcy, and post-judgment proceedings, regardless of whether they are taxable as court costs. The definition of attorneys' fees is broad, encompassing paralegal fees, administrative costs, investigative costs, expert witness costs, court reporter fees, sales and use taxes, and all other charges billed by the attorneys to the prevailing party. This provision aims to make the prevailing party whole by covering the costs associated with pursuing or defending the legal action.