Does the Aplus franchisor have the right to control litigation related to indemnified claims, and how does this affect the indemnification rights?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
p between the parties. Unless otherwise specifically provided in this Agreement with respect to certain issues, whenever this Agreement requires Franchisee to obtain Franchisor's written consent or permits Franchisee to take any action or refrain from taking any action, Franchisor is free to act in its own self-interest without any obligation to act reasonably, to consider the impact on Franchisee or to act subject to any other standard of care limiting Franchisor's right, except as may be provided by statute or regulation.
21.3. Indemnification
Franchisee shall defend, indemnify and hold Franchisor and its affiliates, subsidiaries and parents, and their respective officers, directors, managers, members, partners, shareholders, independent contractors and employees (the "Indemnified Parties") harmless from all fines, suits, proceedings, claims, demands, liabilities, injuries, damages, expenses, obligations or actions of any kind (including costs and reasonable attorneys' fees) arising in whole or in part from Franchisee's ownership, operation, or occupation of the Franchised Business and APLUS Store, performance or breach of its obligations under this Agreement, failure to meet Franchisor requirements and System standards, breach of any warranty or representation in this Agreement or from the acts or omissions of Franchisee, its employees or agents, including its advertising of the Franchised Business, except as otherwise provided in this Agreement. Franchisor and any Indemnified Party shall promptly give Franchisee written notice of any claim for indemnification under this Section 21.3. Any failure to give the notice shall not relieve Franchisee of any liability under this Agreement except to the extent the failure or delay causes actual material prejudice. Franchisor shall have the right to control all litigation, and defend and/or settle any claim against Franchisor or other Indemnified Parties affecting Franchisor's interests, in any manner Franchisor deems appropriate. Franchisor may also retain its own counsel to represent Franchisor or other Indemnified Parties and Franchisee shall advance or
reimburse Franchisor's costs. Franchisor's exercise of this control over the litigation shall not affect its rights to indemnification under this Section 21.3.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Aplus retains significant control over litigation related to indemnified claims. As a franchisee, you are required to defend, indemnify, and hold harmless Aplus and its affiliates from any liabilities, damages, and expenses arising from your operation of the Aplus store. This includes costs and reasonable attorney's fees. Aplus is required to provide you with written notice of any claim for indemnification, but any failure to do so only relieves you of liability if it causes actual material prejudice.
Aplus maintains the right to control all litigation and to defend or settle any claim against them or other indemnified parties that affect their interests, in any manner they deem appropriate. Aplus can also retain its own counsel, and you, as the franchisee, are responsible for advancing or reimbursing Aplus's costs. Importantly, Aplus's control over the litigation does not affect its rights to indemnification. This means that even if Aplus directs the legal strategy, your obligation to cover the costs remains.
Furthermore, as an Aplus franchisee, you cannot consent to any judgment or settle an indemnified claim without the prior written consent of Aplus. Aplus and other indemnified parties are not required to seek recovery from third parties or mitigate losses before seeking indemnification from you. This comprehensive indemnification clause places a significant financial burden on the franchisee, as they may be responsible for legal costs and settlements even when Aplus controls the litigation.