If B Bops tenders the defense of a lawsuit to the franchisee, who is responsible for the costs?
B_Bops Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee further agrees that if Company or any other indemnitee is made a party to a lawsuit or other legal proceeding in connection with the ownership or operation of the Franchise or the conduct or business of Franchisee or its officers, employees or agents, then, at the option of Company or such other indemnitee, Company or such other indemnitee may tender the defense and/or prosecution of the case to Franchisee who shall be responsible for diligently pursuing the case or action at Franchisee's expense, or Company or such other indemnitee may hire counsel directly to protect its respective interests and bill Franchisee for all costs and attorneys' fees incurred in connection therewith, in which case Franchisee shall reimburse promptly the billing party for all such costs and expenses incurred.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to B Bops's 2025 Franchise Disclosure Document, if B Bops is involved in a lawsuit related to the franchisee's B Bops restaurant, B Bops has the option to transfer the defense of the case to the franchisee. If B Bops chooses to do so, the franchisee will be responsible for all costs associated with diligently pursuing the case.
Alternatively, B Bops can choose to hire its own counsel to protect its interests. In this scenario, B Bops will bill the franchisee directly for all costs and attorney's fees incurred. The franchisee is then obligated to promptly reimburse B Bops for these expenses.
This arrangement places a significant financial burden on the franchisee, as they could be responsible for substantial legal costs if a lawsuit arises related to their B Bops restaurant. Franchisees should factor in potential legal expenses when assessing the overall financial viability of the franchise. It is also important to understand what types of situations could lead to such legal proceedings and to ensure adequate insurance coverage is in place, as detailed elsewhere in the FDD.