What are the exceptions to Bhc Franchisor's obligation to indemnify the Franchisee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Franchisor hereby agrees to protect, defend and indemnify Franchisee, its Principal Equity Operators, other owners, affiliates, officers, directors, employees and attorneys and each of them, from any Losses any of them may incur as a result of any third party Proceeding arising out of Franchisor's intentional misfeasance, gross negligence or material breach of Franchisor's obligations under this Agreement, except if caused by the intentional misfeasance of, gross negligence of, or material breach by, Franchisee (or any of its Principal Equity Operators, or other owners, affiliates, officers, directors, employees or attorneys of Franchisee) of any terms of, or Franchisee's obligations arising under, this Agreement.
(c) For the indemnification to be effective, each indemnified party ("Indemnified Party") will give the indemnifying party ("Indemnifying Party") reasonable notice of each claim or loss for which the Indemnified Party demands indemnity and defense, except that failure to provide such notice will not release the Indemnifying Party from any obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure.
The Indemnifying Party will assume, at its sole cost and expense, the defense of such Proceeding through legal counsel reasonably acceptable to the Indemnified Party, except that the Indemnified Party may at its option and expense select and be represented by separate counsel.
The Indemnifying Party will have control over the Proceeding, including the right to settle; provided, however, the Indemnifying Party will not, absent the written consent of the Indemnified Party, consent to the entry of any judgment or enter into any settlement that: (i) provides for any admission of liability on the part of the Indemnified Party or relief other than the payment of monetary damages for which the Indemnifying Party will be solely liable; or (ii) adversely affects the rights of the Indemnified Party under this Agreement, or (iii) does not release the Indemnified
Party from all Proceedings and "Losses" (as defined in section 16.2(d) below) in respect thereof. In no
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, Bhc as the Franchisor agrees to protect, defend, and indemnify the Franchisee from losses resulting from third-party proceedings that arise due to Bhc's intentional misfeasance, gross negligence, or material breach of its obligations under the Franchise Agreement. However, this obligation does not apply if the cause stems from the intentional misfeasance, gross negligence, or material breach by the Franchisee (or its operators, owners, affiliates, officers, directors, employees, or attorneys) of any terms or obligations under the Franchise Agreement. This means that if the Franchisee's own actions or inactions lead to the third-party proceeding, Bhc is not required to indemnify them.
For the indemnification to be effective, the Franchisee must provide Bhc with reasonable notice of any claim or loss for which they are seeking indemnity and defense. Failure to provide this notice may release Bhc from its obligations, but only to the extent that Bhc is materially prejudiced by the failure. Bhc will assume the defense of the proceeding at its own cost and expense, using legal counsel reasonably acceptable to the Franchisee. However, the Franchisee has the option to select and be represented by separate counsel at their own expense.
Bhc retains control over the proceeding, including the right to settle. However, Bhc cannot enter into any judgment or settlement without the Franchisee's written consent if it involves an admission of liability on the Franchisee's part, affects the Franchisee's rights under the agreement, or does not release the Franchisee from all proceedings and losses. The Franchisee will not be liable for any losses that are compromised or settled in violation of these conditions. This section outlines the circumstances under which Bhc is obligated to protect the Franchisee from legal and financial liabilities, as well as the conditions and limitations of that protection.