Who controls the defense of a Proceeding under the Bhc indemnity agreement?

According to Bhc's 2025 Franchise Disclosure Document, the Indemnifying Party has control over the Proceeding, including the right to settle. However, there are some limitations to this control. The Indemnifying Party cannot consent to any judgment or settlement that involves an admission of liability on the part of the Indemnified Party, relief other than monetary damages for which the Indemnifying Party is solely liable, or any action that adversely affects the rights of the Indemnified Party under the Franchise Agreement. Additionally, the settlement cannot release the Indemnified Party from all Proceedings and Losses.

In practical terms, this means that if a third party brings a claim against a Bhc franchisee (the Indemnified Party) due to the franchisor's (Indemnifying Party) actions, Bhc will take over the legal defense. Bhc will choose the legal counsel, manage the litigation, and has the right to negotiate a settlement. However, Bhc cannot make agreements that negatively impact the franchisee without their written consent. This protects the franchisee from being forced into accepting a settlement that admits fault or imposes obligations on them.

This type of indemnity agreement is relatively common in franchising. It aims to allocate risk and responsibility between the franchisor and franchisee. The franchisee is protected from liabilities arising from the franchisor's misconduct, while the franchisor retains control over the legal strategy and settlement decisions. Franchisees should carefully review the specific terms of the indemnity clause to understand the scope of protection and the limitations on the franchisor's control.