Does the indemnification obligation of a 1 800 Packouts franchisee include defense costs?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree to indemnify and hold harmless us, our affiliates, and our and their respective owners, directors, officers, employees, agents, representatives, successors, and assignees (the "Indemnified Parties") against, and to reimburse any one or more of the Indemnified Parties for, all Losses (defined below) directly or indirectly arising out of or relating to: (i) the Franchised Business' operation; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any law, ordinance, rule or regulation, including those concerning the Franchised Business' construction, design or operation, and including any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees; or (v) claims alleging either intentional or negligent conduct, acts or omissions by you (or your contractors or any of your or their employees, agents or representatives), or by us or our affiliates (or our or their contractors or any of our or their employees, agents or representatives), subject to Section C. (Willful Misconduct or Gross Negligence). "Losses" means any and all losses, expenses, obligations, liabilities, damages (actual, consequential, or otherwise), and reasonable defense costs that an Indemnified Party incurs, including accountants', arbitrators', mediators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts' 2025 Franchise Disclosure Document, the franchisee's indemnification obligations do include defense costs. 1 800 Packouts franchisees must indemnify and hold harmless 1 800 Packouts and its affiliates, owners, directors, officers, employees, agents, representatives, successors, and assignees (the "Indemnified Parties") from all losses arising out of the operation of the franchised business, the franchisee's business conduct, breach of the agreement, noncompliance with laws, or claims alleging intentional or negligent conduct.
The term "Losses" is defined broadly to include all losses, expenses, obligations, liabilities, and damages, as well as reasonable defense costs. These defense costs specifically include accountants', arbitrators', mediators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses related to litigation, arbitration, or alternative dispute resolution.
This means that if a 1 800 Packouts franchisee is sued or incurs losses due to any of the reasons listed, they are responsible for covering not only the damages or liabilities but also all associated defense costs. However, the franchisee is not required to indemnify 1 800 Packouts for losses caused solely and directly by 1 800 Packouts' willful misconduct or gross negligence, as long as the claim is not based on vicarious liability or the franchisee's failure to comply with the agreement. In such cases, 1 800 Packouts will reimburse the franchisee for losses, including defense costs.