Can an Indemnified Party settle a claim against it at the Black Bear Diner franchisee's expense?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and Personal Guarantors agree to indemnify, defend, and hold harmless Franchisor, its current and former affiliates, and their respective past and present shareholders, directors, officers, employees, agents, successors, and assignees (the "Indemnified Parties") against, and to reimburse any one or more of the Indemnified Parties for, all claims, obligations, and damages directly or indirectly arising out of the Franchised Restaurant's operation, the business Franchisee conducts under this Agreement, Franchisee's or Franchisee's employees actions or inaction, or Franchisee's breach of this Agreement, including, without limitation, those alleged to be or found to have been caused by the Indemnified Party's negligence, unless (and then only to the extent that) the claims, obligations, or damages are determined to be caused solely by our gross negligence or willful misconduct in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction.
For purposes of this indemnification, "claims" include all obligations, damages (actual, consequential, or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it, including, without limitation, reasonable accountants', arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced. Each Indemnified Party may defend any claim against it at Franchisee's expense and agree to settlements or take any other remedial, corrective, or other actions.
This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination. An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you under this subparagraph. Franchisee agrees that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may recover under this subparagraph.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the franchisee is responsible for indemnifying the franchisor and related parties. Specifically, Black Bear Diner's franchise agreement stipulates that an Indemnified Party can defend any claim against it at the franchisee's expense. Moreover, the Indemnified Party can agree to settlements or take any other remedial, corrective, or other actions related to the claim.
This means that as a Black Bear Diner franchisee, you could be financially responsible for claims, obligations, and damages arising from the operation of your restaurant, your actions or inactions, or any breach of the franchise agreement. This includes covering all costs incurred by the Indemnified Party in defending against such claims, including legal fees, investigation costs, and settlement amounts.
However, there is an exception: you are not responsible for claims, obligations, or damages determined to be caused solely by the gross negligence or willful misconduct of Black Bear Diner, as ruled by a court or arbitrator. This indemnification clause remains in effect even after the franchise agreement expires or terminates. It's also important to note that the Indemnified Party doesn't have to seek recovery from any insurer or mitigate losses before seeking compensation from the franchisee.