Does the indemnification obligation in the Bath Tune Up agreement survive the termination of the agreement and other financing agreements?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
Pledgor shall indemnify and hold Secured Party, and its directors, agents, employees and counsel, harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Pledgor shall pay the maximum portion which it is permitted to pay under applicable law to Secured Party in satisfaction of indemnified matters under this Section. The foregoing indemnity shall survive the payment of the Obligations, the termination of this Agreement and the other Financing Agreements. All of the foregoing costs and expenses shall be part of the Obligations and secured by the Collateral.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, the indemnification obligations of the Pledgor, which would be the franchisee, do indeed survive the termination of the franchise agreement and other financing agreements. Specifically, the franchisee must indemnify and hold the Secured Party (likely the franchisor or a lender) harmless from any losses, claims, damages, liabilities, costs, or expenses related to litigation, investigations, or claims arising from the franchise agreement, other financing agreements, or related transactions. This includes settlement amounts, court costs, and legal fees.
This means that even after the Bath Tune Up franchise agreement ends, whether through expiration or termination, the franchisee could still be responsible for covering legal costs and damages if any claims or lawsuits arise related to their operation of the franchise. This obligation extends to any financing agreements associated with the franchise as well.
The FDD also states that if the indemnification clause is deemed unenforceable under any law or public policy, the franchisee is still obligated to pay the maximum portion permissible under applicable law to satisfy the indemnified matters. Furthermore, all costs and expenses related to indemnification are considered part of the franchisee's obligations and are secured by the collateral, meaning the franchisor could potentially claim assets to cover these costs. This is a significant obligation for a franchisee to consider, as it extends beyond the active term of the agreement and could have long-term financial implications.