Must an Annex Brands franchisee indemnify Annex Brands for breaches of confidentiality by their personnel?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees that he, she or they: 1) will not use the Confidential Information in any other business or capacity; 2) will maintain the absolute confidentiality of the Confidential Information during and after the term of the Franchise; 3) will not make unauthorized copies of any portion of the Confidential Information disclosed to Franchisee in the Manuals, in writing or otherwise; and 4) will adopt and implement all reasonable procedures prescribed periodically by Franchisor to prevent unauthorized use or disclosure of the Confidential Information, including restrictions on disclosure of the Confidential Information to managers and other personnel of the Center, and the use of non-disclosure agreements with managers and other personnel who have access to the Confidential Information.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
Based on the 2025 FDD, Annex Brands requires franchisees to implement procedures to prevent unauthorized use or disclosure of confidential information, including imposing restrictions on disclosure to their managers and personnel. Franchisees must also use non-disclosure agreements with personnel who have access to confidential information. While the FDD excerpt specifies the franchisee's responsibility to maintain confidentiality and prevent unauthorized disclosures by their personnel, it does not explicitly state that the franchisee must indemnify Annex Brands for breaches of confidentiality by their personnel.
However, the franchisee acknowledges that the confidential information is owned by Annex Brands and constitutes a trade secret. They agree not to use the confidential information in any other business or capacity and to maintain its absolute confidentiality during and after the franchise term. The franchisee is also prohibited from making unauthorized copies of the confidential information. These stipulations suggest that the franchisee bears significant responsibility for safeguarding Annex Brands' confidential information.
Given the franchisee's responsibility to protect confidential information and the lack of explicit mention of indemnification for breaches by personnel, prospective franchisees should seek clarification from Annex Brands regarding their liability in such situations. It would be prudent to understand the extent to which they would be held responsible for the actions of their employees concerning confidential information and whether they would be required to indemnify Annex Brands for any losses resulting from such breaches.