What costs must the franchisee indemnify Aw for if Aw incurs them enforcing the Aw franchise agreement?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
You further agree to hold us harmless and indemnify and defend us for all cost, expense or loss we incur in enforcing the provisions of this Agreement, in defending our actions taken relating to this Agreement, or resulting from your breach of this Agreement, including, without limitation, reasonable arbitrators' and attorneys' fees (including those for appeal), unless, after legal proceedings are completed, you are found to have fulfilled and complied with all the terms of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, franchisees must indemnify Aw for costs incurred while enforcing the franchise agreement, defending actions related to the agreement, or resulting from a franchisee's breach of the agreement. This includes reasonable arbitrators' and attorneys' fees, including those for appeals. However, the franchisee is not responsible for these costs if legal proceedings determine that they have fulfilled and complied with all terms of the agreement.
This means that if Aw has to take legal action against a franchisee to enforce the franchise agreement, the franchisee may be responsible for covering Aw's legal expenses. These expenses can include not only the fees for Aw's attorneys but also the costs associated with arbitrators if the dispute is resolved through arbitration rather than a court trial. The franchisee may also be responsible for appeal fees if the legal battle extends to the appellate courts.
However, there is a significant exception: if the franchisee ultimately wins the legal case and is found to have been in full compliance with the franchise agreement, they will not be required to cover Aw's enforcement costs. This provision encourages franchisees to comply with the agreement but also provides a degree of protection if Aw brings an unfounded legal challenge. It is important for prospective franchisees to understand this clause, as legal disputes can be costly, and this section of the agreement outlines who bears the financial responsibility.
This type of indemnification clause is relatively standard in franchise agreements. It aims to protect the franchisor from bearing the costs of enforcing its agreements when franchisees are in violation. Franchisees should carefully review this section of the franchise agreement with legal counsel to fully understand their potential financial exposure and rights.