Does the Aw franchise agreement require the franchisee to defend Aw against claims arising out of the franchisee's breach of the agreement?
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 is required to defend Aw against claims arising out of the franchisee's breach of the franchise agreement. Specifically, the franchisee must indemnify, defend, and hold harmless Aw, its shareholders, directors, officers, employees, agents, and assignees. This obligation extends to reimbursing Aw for all obligations, damages, and taxes for which Aw is held liable, as well as all costs reasonably incurred in defending any claim brought against Aw. These costs include 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. Aw retains the right to defend any such claim against it.
Furthermore, the franchisee agrees to hold Aw harmless and indemnify and defend Aw for all costs, expenses, or losses Aw incurs in enforcing the provisions of the franchise agreement, defending actions taken relating to the agreement, or resulting from the franchisee's breach of the agreement. This includes reasonable arbitrators' and attorneys' fees, including those for appeal, unless legal proceedings determine that the franchisee fulfilled and complied with all terms of the agreement.
This requirement means that if a third party sues Aw due to the franchisee's actions or breach, the franchisee is responsible for covering Aw's legal defense costs and any resulting damages. This is a significant obligation for the franchisee, as legal costs can be substantial. Franchisees should understand the scope of this indemnification clause and ensure they have adequate insurance coverage to protect themselves against potential claims. This type of clause is relatively common in franchise agreements, as franchisors seek to protect themselves from liabilities arising from the operations of their franchisees.