Can an Indemnified Party choose to defend a claim against 7 Brew at the franchisee's expense?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
You also agree to defend the Indemnified Parties (unless an Indemnified Party chooses to defend at your expense as provided in the following paragraph) against any and all such claims, inquiries, actions, investigations, and proceedings, including those alleging the Indemnified Party's negligence, gross negligence, willful misconduct, and willful wrongful omissions. However, you have no obligation to indemnify or hold harmless an Indemnified Party for any Losses to the extent they are determined in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction to have been caused solely and directly by the Indemnified Party's negligence, willful misconduct, or willful wrongful omissions, so long as the claim to which those Losses relate is not asserted on the basis of theories of vicarious liability (including agency, apparent agency, or joint employment) or our failure to compel you to comply with this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the franchisee must indemnify and hold harmless 7 Brew and its affiliates, owners, directors, officers, employees, agents, successors, and assignees (referred to as the "Indemnified Parties") from all losses resulting from third-party claims related to the store's construction, operation, noncompliance with laws, data security incidents, or breach of the Franchise Agreement. This means the franchisee is financially responsible for covering the losses incurred by 7 Brew due to these issues.
The franchisee also agrees to defend the Indemnified Parties against such claims. However, there is an exception: an Indemnified Party can choose to defend the claim themselves, but at the franchisee's expense. This means that 7 Brew has the option to take over the defense of a claim, and the franchisee would be responsible for covering the legal costs incurred by 7 Brew in doing so.
This arrangement does not apply if the losses are determined to be solely and directly caused by the Indemnified Party's negligence, willful misconduct, or willful wrongful omissions, provided the claim isn't based on vicarious liability or 7 Brew's failure to compel the franchisee to comply with the agreement. In such cases, the franchisee is not obligated to indemnify or hold harmless the Indemnified Party. This section outlines the responsibilities and potential financial burdens for a 7 Brew franchisee regarding legal claims and liabilities, highlighting the importance of understanding the scope of indemnification and defense obligations within the franchise agreement.