Are All States M.E.D. franchisees required to indemnify the franchisor for violations of local laws?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
21.3 Indemnification
Franchisee shall hold harmless and indemnify Franchisor, any Affiliate, all holders of a legal or beneficial interest in Franchisor and all officers, directors, executives, managers, members, partners, owners, employees, agents, successors and assigns (collectively "Franchisor Indemnities") from and against all losses, damages, fines, costs, expenses or liability (including reasonable attorneys' fees and all other costs of litigation) incurred in connection with any action, suit, demand, claim, investigation or proceeding, or any settlement thereof, which arises from or is based upon Franchisee's (a) ownership or operation of the Franchised Business; (b) violation, breach or asserted violation or breach of any federal, state or local law, regulation or rule; (c) breach of any representation, warranty, covenant, or provision of this Agreement or any other agreement between Franchisee and Franchisor (or an Affiliate); (d) defamation of Franchisor or the System; (e) acts, errors or omissions committed or incurred in connection with the Franchised Business; or (f) infringement, violation or alleged infringement or violation of any Mark, patent or copyright or any misuse of the Trade Secrets or other Confidential Information. The obligations of this Section 21.3 shall expressly survive the termination of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, franchisees are required to indemnify the franchisor under certain conditions. Specifically, the franchisee must hold harmless and indemnify All States M.E.D. and its affiliates from losses, damages, fines, costs, expenses, or liability, including attorney's fees and litigation costs. This indemnification extends to any action, suit, demand, claim, investigation, or proceeding arising from the franchisee's ownership or operation of the franchised business.
This indemnification requirement includes instances where the franchisee violates, breaches, or is asserted to have violated or breached any federal, state, or local law, regulation, or rule. It also applies to breaches of any representation, warranty, covenant, or provision of the Franchise Agreement or any other agreement between the franchisee and All States M.E.D., defamation of All States M.E.D. or its system, acts, errors, or omissions committed in connection with the franchised business, and infringement or violation of any mark, patent, or copyright, or misuse of trade secrets or confidential information.
This means that if an All States M.E.D. franchisee violates a local law during the operation of their business, they are responsible for covering any resulting losses, damages, fines, and legal expenses incurred by the franchisor. This obligation survives the termination of the Franchise Agreement, meaning the franchisee's responsibility to indemnify All States M.E.D. continues even after the franchise relationship ends. Franchisees should be aware of all applicable laws and regulations in their area to minimize the risk of triggering this indemnification clause.
However, the Minnesota Addendum to the Disclosure Document states that nothing in the Franchise Disclosure Document or agreements can abrogate or reduce any of the franchisee's rights as provided for in Minnesota Statutes, Chapter 80C, or franchisee's rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction. Also, the North Dakota Addendum to the Disclosure Document states that any requirement in the Franchise Agreement that requires the franchisee to pay all costs and expenses incurred by the franchisor in enforcing the agreement is void. Instead, the prevailing party in any enforcement action is entitled to recover all costs and expenses including attorney's fees.