Is the Belocal franchisee required to indemnify for third-party claims premised on Franchisor's direct or vicarious liability?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
(10) any thirdparty claim that arises from or that explicitly or implicitly is premised on Franchisor's direct and vicarious liability or that arises from Franchisee's employment and personnel decisions, including wrongful termination, wage and hour violations, and employee harassment and discrimination claims;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchisee is required to indemnify Belocal for third-party claims that arise from or are explicitly or implicitly premised on Belocal's direct and vicarious liability. This means that if someone sues Belocal based on something Belocal did (directly or indirectly), and that lawsuit arises from the franchisee's operations, the franchisee must cover Belocal's losses, expenses, judgments, claims, attorney fees, and damages.
This obligation is broad and significant. It extends not only to direct actions by the franchisee but also to situations where Belocal is held liable due to its relationship with the franchisee. The franchisee's responsibility includes covering legal costs, settlements, and any other financial repercussions resulting from such claims. This requirement is not uncommon in franchising, as franchisors often seek to protect themselves from liabilities arising from the actions of their franchisees.
Furthermore, the FDD states that Belocal has the right to retain counsel of their choosing to represent them with respect to any claim, and control the response thereto and the defense thereof, including the right to enter into settlements or take any other mitigating, remedial, corrective, or other actions they deem appropriate, all at the franchisee's expense and risk. The franchisee must immediately reimburse Belocal for all costs, expenses, and attorneys' fees upon request. The franchisee also agrees to cooperate fully with Belocal in defending any such claim.
This indemnification clause places a considerable financial burden on the Belocal franchisee. A prospective franchisee should carefully evaluate their risk management strategies and insurance coverage to ensure they can meet these potential obligations. It would be prudent to consult with a legal and financial advisor to fully understand the implications of this clause and to assess the potential financial exposure.