What is the exception to the Bhc Master Franchisee's indemnification obligation to the Franchisor?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Master Franchisee and its Principal Equity Operators, jointly and severally, hereby agree to protect, defend and indemnify Franchisor, and all of Franchisor's past, present and future owners, affiliates, officers, directors, employees, attorneys and designees, and each of them, and hold them harmless from and against any and all Losses arising out of or in connection with any "Proceeding" (as defined in section 16.2(f) below) concerning Master Franchisee's intentional tort or negligence, or the intentional tort or negligence of Master Franchisee's agents, servants or representatives, relating to Master Franchisee's development, maintenance or operation of the BHC Restaurant and the Franchised Business, except if caused by Franchisor's intentional misfeasance, gross negligence or material breach of any terms of, or Franchisor's obligations arising under, this Agreement.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the Master Franchisee is generally obligated to protect, defend, and indemnify Bhc (the Franchisor) against losses arising from legal proceedings related to the Master Franchisee's intentional tort or negligence in developing, maintaining, or operating the Bhc restaurant. This obligation extends to the Master Franchisee's agents, servants, or representatives. This means that if the Master Franchisee's actions or the actions of their employees lead to a lawsuit or other legal claim, the Master Franchisee is responsible for covering Bhc's losses, including legal fees and damages. This is a standard practice in franchising, as it protects the franchisor from liabilities caused by the franchisee's operations.
However, there is an exception to this indemnification obligation. The Master Franchisee is not required to indemnify Bhc if the losses are caused by Bhc's intentional misfeasance, gross negligence, or material breach of the franchise agreement. In other words, if Bhc itself is at fault due to its own intentional or grossly negligent actions, or if it violates the terms of the franchise agreement, the Master Franchisee is not responsible for indemnifying Bhc.
This exception provides a degree of protection for the Master Franchisee. It ensures that the Master Franchisee is not held liable for Bhc's own misconduct or contractual breaches. However, the burden of proof would likely fall on the Master Franchisee to demonstrate that Bhc's actions meet the threshold of intentional misfeasance, gross negligence, or material breach, which can be challenging in practice. It is important for prospective franchisees to understand the scope of this indemnification obligation and the potential exceptions, as it can have significant financial implications.