What is excluded from the 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.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the franchisor is not obligated to protect, defend, and indemnify the franchisee if the third-party proceeding arises due to the franchisee's intentional misfeasance, gross negligence, or material breach of the franchise agreement. This exclusion extends to the franchisee's Principal Equity Operators, other owners, affiliates, officers, directors, employees, and attorneys.
This means that if a third party sues the Bhc franchisee and the cause of the lawsuit is due to the franchisee's actions (or the actions of their related parties) that were intentional, grossly negligent, or a material breach of the franchise agreement, then Bhc will not cover the franchisee's losses in that legal proceeding. The franchisee will be responsible for their own legal defense and any resulting damages.
This is a fairly standard clause in franchise agreements. It ensures that Bhc is not held liable for the franchisee's own misconduct or failure to adhere to the terms of the agreement. Prospective franchisees should carefully review the definition of "material breach" in the franchise agreement to understand the scope of this exclusion.
It is important for a prospective Bhc franchisee to understand this allocation of risk. Franchisees should ensure they have adequate insurance coverage and operate their business in a manner that complies with the franchise agreement to minimize the risk of being excluded from indemnification.