What is the consequence if the Indemnified Party fails to provide reasonable notice to the Indemnifying Party regarding a claim for indemnity under the Bhc franchise agreement?

According to Bhc's 2025 Franchise Disclosure Document, if an indemnified party fails to provide reasonable notice to the indemnifying party regarding a claim for indemnity and defense, this failure will not automatically release the indemnifying party from its obligations. However, there is an exception: the indemnifying party is released from obligations to the extent that it is materially prejudiced by the failure to receive reasonable notice.

In practical terms, this means that if a franchisee (the indemnified party in certain situations) has a claim where they believe Bhc (the indemnifying party) should provide indemnity and defense, they must promptly notify Bhc of the claim. If the franchisee delays or fails to provide this notice, Bhc may still be obligated to provide indemnity and defense unless Bhc can demonstrate that the delay or lack of notice significantly harmed their ability to defend against the claim.

For example, if a franchisee is sued and waits an unreasonable amount of time before notifying Bhc, and during that time critical evidence is lost or witnesses become unavailable, Bhc might argue that they were materially prejudiced by the delay and therefore should not be fully responsible for the indemnity. This provision encourages franchisees to communicate promptly with Bhc regarding any potential claims to ensure both parties can effectively address the issue. Franchisees should consult with a legal professional to understand their obligations and rights under the indemnity clause.