What costs are included in the indemnification obligation of the franchisee to Aw?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree to indemnify, defend and hold us, our shareholders, directors, officers, employees, agents and assignees, harmless against and to reimburse us for all such obligations, damages, and taxes for which we are held liable and for all costs we reasonably incur in the defense of any such claim brought against us or in any such action in which we are named as a party, arising out of your operation of the Papa Ray's Pizza Restaurant, and/or arising out of your breach of this Agreement, including without limitation actual and consequential damages, reasonable attorneys', accountants', and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses.
We have the right to defend any such claim against us.
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, the franchisee's indemnification obligation includes a comprehensive range of costs. Aw requires franchisees to indemnify, defend, and hold harmless Aw, its shareholders, directors, officers, employees, agents, and assignees. This protection extends to all obligations, damages, and taxes for which Aw is held liable due to the franchisee's actions or breach of the Franchise Agreement.
The specific costs covered by this indemnification include actual and consequential damages, which means franchisees are responsible for both direct losses and any indirect losses resulting from their actions. Additionally, franchisees must cover reasonable attorneys', accountants', and expert witness fees, which can be substantial in complex legal cases. The indemnification also extends to costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses incurred by Aw in defending against any claim or action related to the franchisee's business operations or breach of contract.
Furthermore, the franchisee is responsible for all costs, expenses, or losses Aw incurs in enforcing the provisions of the Franchise Agreement or defending actions taken relating to the agreement, particularly if these actions result from the franchisee's breach. This includes reasonable arbitrators' and attorneys' fees, even those incurred during appeals, unless legal proceedings determine that the franchisee has fully complied with all terms of the agreement. This broad indemnification clause places a significant financial responsibility on the franchisee to protect Aw from liabilities and expenses arising from the franchisee's operation of their Papa Ray's Pizza Restaurant.
Prospective franchisees should be aware of the breadth of this indemnification obligation and consider obtaining adequate insurance coverage to mitigate potential financial risks. It is also advisable to consult with legal and financial professionals to fully understand the implications of this clause and to assess the potential costs associated with it.