Does the indemnification obligation of a Bevaris Alliance franchisee include settlement costs?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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; and
- (d) subject to Franchisee providing security to Franchisor to Franchisor's reasonable satisfaction against any claim, liability, costs, expenses, damages or losses which may be incurred, take such action as Franchisee may reasonably request to avoid, dispute, compromise or defend the Claim.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, franchisees are potentially responsible for covering settlement costs incurred by the franchisor under certain conditions. Specifically, the franchisee must indemnify Bevaris Alliance against various liabilities, costs, expenses, damages, and losses. These include legal costs and attorney's fees calculated on a full indemnity basis, as well as other reasonable professional costs and expenses. This broad indemnification extends to situations arising from the franchisee's breach of the franchise agreement, negligent performance, or any third-party claims resulting from the franchisee's actions or omissions.
However, the franchisee's obligation to cover these costs is not absolute. Bevaris Alliance must provide written notice of any claim to the franchisee and cannot make any admission of liability, agreement, or compromise without the franchisee's prior written consent. An exception exists if Bevaris Alliance reasonably believes that failure to settle the claim would be prejudicial to it in any material respect, in which case they may settle after giving prior written notice to the franchisee. The franchisee also has the right to access Bevaris Alliance's premises, records, and personnel to assess the claim, and can request Bevaris Alliance to take action to dispute or defend the claim, provided the franchisee offers security to cover potential costs and liabilities.
It's important to note that the indemnity does not cover Bevaris Alliance to the extent that a claim results from their own negligence or willful misconduct. This means that if the franchisor's actions contribute to the claim, the franchisee's indemnification obligation may be reduced or eliminated. This type of indemnification clause is relatively standard in franchise agreements, designed to protect the franchisor from liabilities arising from the franchisee's operation of the business. A prospective Bevaris Alliance franchisee should carefully consider the scope of this indemnity and the potential financial exposure it creates, and discuss it with a legal professional.