What is Bhc Franchisor's responsibility to protect, defend, and indemnify the Master Franchisee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Franchisor hereby agrees to protect, defend and indemnify Master 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, Master Franchisee (or any of its Principal Equity Operators, or other owners, affiliates, officers, directors, employees or attorneys of Master Franchisee) of any terms of, or Master 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 event will the Indemnified Party be liable for any Losses that are compromised or settled in violation of this section 16.2.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, Bhc agrees to protect, defend, and indemnify the Master Franchisee, its Principal Equity Operators, other owners, affiliates, officers, directors, employees, and attorneys from any losses they may incur. This protection applies to any third-party proceeding arising from Bhc's intentional misfeasance, gross negligence, or material breach of its obligations under the Master Franchise Agreement. However, this indemnification does not apply if the losses are caused by the intentional misfeasance, gross negligence, or material breach of the Master Franchisee, its operators, owners, affiliates, officers, directors, employees, or attorneys. This outlines the circumstances under which Bhc will be responsible for covering the Master Franchisee's losses in legal proceedings.
For the indemnification to be effective, the Master Franchisee must provide Bhc with reasonable notice of any claim or loss for which they seek indemnity and defense. Failure to provide timely notice will only release Bhc from its obligations if Bhc is materially prejudiced by the delay. Bhc will assume the defense of the proceeding at its sole cost and expense, using legal counsel reasonably acceptable to the Master Franchisee. However, the Master Franchisee has the option to select and be represented by separate counsel at their own expense. This ensures that the Master Franchisee has some control over their legal representation while Bhc manages the overall defense.
Bhc retains control over the legal proceeding, including the right to settle. However, Bhc cannot enter into any judgment or settlement without the Master Franchisee's written consent if it involves: any admission of liability on the part of the Master Franchisee, any relief other than monetary damages for which Bhc will be solely liable, any adverse effects on the Master Franchisee's rights under the agreement, or a failure to release the Master Franchisee from all proceedings and losses. The Master Franchisee will not be liable for any losses that are compromised or settled in violation of these conditions. This provision protects the Master Franchisee from settlements that could harm their reputation, rights, or financial standing.