Who has the right to defend any claim against the Big Apple Bagels franchisor?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees to indemnify Franchisor and its subsidiaries, Affiliates, stockholders, directors, officers, employees, agents, successors, and assignees against and to reimburse them for all obligations, damages, and taxes set forth in this Agreement for which they are held liable and for all costs reasonably incurred by them in the defense of any claims brought against them or in any action in which they are named as a party, including without limitation, reasonable attorneys' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses as a result of or related in any way to the operation of the Store, except to the extent caused by Franchisor's negligent or willful action or failure to act. Franchisor has the right to defend any such claim against it. Franchisee shall also indemnify and hold Franchisor and its officers, directors, employees and agents harmless from any and all claims, demands or liabilities arising from the offer or sale of securities, whether asserted by a purchaser of any security or by a governmental agency. Franchisor has the right to defend any such claims.
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the franchisor has the right to defend any claim brought against it. Specifically, the franchisee is required to indemnify Big Apple Bagels and its related parties, such as subsidiaries, affiliates, stockholders, directors, officers, employees, agents, successors, and assignees. This indemnification covers all obligations, damages, and taxes outlined in the agreement for which these parties are held liable. It also includes all costs reasonably incurred in defending against claims or actions in which they are named as a party. These costs include reasonable attorneys' and expert witness fees, costs of investigation, proof of facts, court costs, other litigation expenses, and travel and living expenses related to the operation of the store.
However, this indemnification does not extend to situations caused by Big Apple Bagels' negligent or willful actions or failures to act. The franchisee is also obligated to indemnify and hold Big Apple Bagels and its officers, directors, employees, and agents harmless from any claims, demands, or liabilities arising from the offer or sale of securities, whether asserted by a purchaser of any security or by a governmental agency. Again, Big Apple Bagels retains the right to defend any such claims.
In essence, the franchisee bears significant responsibility for covering the franchisor's legal defense costs and liabilities related to the store's operation, unless the issue stems directly from Big Apple Bagels' own negligence or willful misconduct. This arrangement is common in franchising, where the franchisee's actions can create legal exposure for the franchisor, but it places a considerable financial burden on the franchisee to protect the franchisor.