What is included in the definition of 'Losses' for which an Auntie Annes franchisee may be liable for indemnification?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
A. Indemnification Obligation. You must defend, indemnify, and hold harmless us and our affiliates, our and their permitted successors and assigns, and each of our and their respective direct and indirect owners, directors, officers, managers, employees, agents, attorneys, and representatives (collectively, the "Indemnified Parties") from and against all Losses (defined below), which any of the Indemnified Parties may suffer, sustain, or incur as a result of a claim asserted or inquiry made formally or informally, or a legal action, investigation, or other proceeding brought, by a third party and directly or indirectly arising out of or relating to: (i) the operation of the Franchised Business; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any Law; or (v) any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees. "Losses" include all obligations, liabilities, damages (actual, consequential, or otherwise), and reasonable defense costs that any Indemnified Party incurs. Defense costs include arbitrators', 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 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, franchisees are required to indemnify Auntie Annes and its affiliates against any losses they incur due to third-party claims related to the franchisee's business operations. This indemnification obligation arises from claims or inquiries related to the operation of the franchised business, the franchisee's conduct under the agreement, breaches of the agreement, noncompliance with laws, or allegations that Auntie Annes is a joint employer.
The term "Losses" is broadly defined to include all obligations, liabilities, damages, and reasonable defense costs incurred by Auntie Annes. This encompasses actual and consequential damages, as well as defense costs such as arbitrators', attorneys', and expert witness fees. It also covers costs related to investigation, proof of facts, court costs, travel, living expenses, and other expenses related to litigation, arbitration, or alternative dispute resolution.
This indemnification clause means that if a customer sues Auntie Annes because of something that happened at the franchisee's location, the franchisee is responsible for covering Auntie Annes's legal costs and any damages awarded. This could include a wide range of issues, from a slip-and-fall accident to a dispute over wages paid to employees. The franchisee's responsibility extends to covering all related expenses, potentially creating a significant financial burden. Franchisees should be aware of this broad indemnification obligation and ensure they have adequate insurance coverage to protect themselves against potential claims.