Is the Bevaris Alliance Franchisee required to indemnify the Franchisor for loss of reputation?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
with such deletion as may be necessary to make it valid or effective.
21. Indemnity
- 21.1 In this clause, a reference to Franchisor shall include Franchisor's subsidiaries and affiliates, and the provisions of this clause shall be for the benefit of Franchisor and each such subsidiary and affiliate and shall be enforceable by each such subsidiary and affiliate, in addition to Franchisor.
- 21.2 Franchisee shall indemnify Franchisor against all liabilities, costs, expenses, damages and losses (including any direct, indirect or consequential losses, loss of profit, loss of reputation and all interest, penalties and legal costs including attorney's fees (calculated on a full indemnity basis) and all other reasonable professional costs and expenses) suffered or incurred by Franchisor arising out of or in connection with:
- (a) Franchisee's breach or negligent performance or non-performance of this agreement;
- (b) the enforcement of this agreement;
- (c) any claim made against Franchisor by a third party to the extent that such claim arises out of the breach, negligent performance or failure or delay in performance of this agreement by Franchisee, its employees, agents or subcontractors; and
- (d) any claim made against Franchisor by a third party for death, personal injury or damage to property to the extent attributable to the acts or omissions of Franchisee, its employees, agents or subcontractors.
- 21.3 This indemnity shall not cover Franchisor to the extent that a claim under it results from Franchisor's negligence or willful misconduct.
- 21.4 Liability under this indemnity is conditional on Franchisor discharging the following obligations. If any third party makes a claim, or notifies an intention to make a claim, against Franchisor which may reasonably be considered likely to give rise to a liability under this indemnity (Claim), Franchisor shall:
- (a) as soon as reasonably practicable, give written notice of the Claim to Franchisee, specifying the nature of the Claim in reasonable detail;
- (b) not make any admission of liability, agreement or compromise in relation to the Claim without the prior written consent of Franchisee (such consent not to be unreasonably conditioned, withheld or delayed), provided that Franchisor may settle the Claim (after giving prior written notice of the terms of settlement (to the extent legally possible) to Franchisee, but without obtaining Franchisee's consent) if Franchisor reasonably believes that failure to settle the Claim would be prejudicial to it in any material respect;
- (c) give Franchisee and its professional advisers access at reasonable times (on reasonable prior notice) to its premises and its officers, directors, employees, agents, representatives or advisers, and to any relevant assets, accounts, documents and records within the power or control of Franchisor, so as to enable Franchisee and its professional advisers to examine them and to take copies (at Franchisee's expense) for the purpose of assessing the Claim;
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 FDD, Bevaris Alliance franchisees are required to indemnify the franchisor for losses, including loss of reputation, under certain conditions. Specifically, section 21.2 states that the franchisee shall indemnify Bevaris Alliance against all liabilities, costs, expenses, damages, and losses, including direct, indirect, or consequential losses, loss of profit, loss of reputation, interest, penalties, and legal costs, arising out of or in connection with several factors. These include the franchisee's breach or negligent performance of the agreement, the enforcement of the agreement, claims made against Bevaris Alliance by a third party due to the franchisee's breach, negligence, or failure to perform, and claims against Bevaris Alliance by a third party for death, personal injury, or property damage attributable to the franchisee's acts or omissions. This means that if the franchisee's actions lead to a loss of reputation for Bevaris Alliance, the franchisee is financially responsible for covering the associated costs and damages.
However, section 21.3 provides an exception, stating that the indemnity does not cover Bevaris Alliance to the extent that a claim results from Bevaris Alliance's negligence or willful misconduct. This means that if the loss of reputation is due to Bevaris Alliance's own actions, the franchisee is not responsible for indemnifying them.
Section 21.4 outlines the conditions that Bevaris Alliance must meet to claim indemnity. Bevaris Alliance must provide written notice of the claim to the franchisee as soon as reasonably practicable, specifying the nature of the claim. Bevaris Alliance must not make any admission of liability, agreement, or compromise without the franchisee's prior written consent, although Bevaris Alliance may settle the claim if it reasonably believes that failure to do so would be prejudicial. The franchisor must also give the franchisee access to its premises, officers, documents, and records to assess the claim. Additionally, the franchisee can request action to avoid, dispute, compromise, or defend the claim, provided they offer security to Bevaris Alliance against any potential liabilities.
This indemnification clause is a significant consideration for prospective franchisees. It means they could be held financially liable for a wide range of potential issues, including damage to the brand's reputation, stemming from their business operations. Franchisees should carefully consider the scope of this indemnity and ensure they have adequate insurance coverage and risk management strategies in place. It is also important to understand the circumstances under which the franchisor is responsible for their own actions, and what steps the franchisee can take to protect themselves in the event of a claim.