Does the exception for willful misconduct or gross negligence apply to claims based on vicarious liability related to a Body20 franchise?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
11.3 Willful Misconduct or Gross Negligence. Despite Section 11.1, you have no obligation to indemnify or hold harmless an Indemnified Party for, and we will reimburse you for, any Losses (including costs of defending any Proceeding under Section 11.2) to the extent they are determined in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction to have been caused solely and directly by the Indemnified Party's willful misconduct or gross negligence, so long as the claim to which those Losses relate is not asserted on the basis of theories of vicarious liability (including agency, apparent agency, or employment) or our failure to compel you to comply with this Agreement. However, nothing in this Section 11.3 limits your obligation to defend us and the other Indemnified Parties under Section 11.2.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, franchisees are typically obligated to indemnify Body20 for losses. However, there's an exception regarding willful misconduct or gross negligence.
Specifically, franchisees are not required to indemnify Body20 if a court or arbitrator determines that the losses were caused solely and directly by Body20's willful misconduct or gross negligence. However, this exception does not apply if the claim is based on vicarious liability, including agency, apparent agency, employment, or Body20's failure to compel the franchisee to comply with the agreement.
In simpler terms, if Body20 is found liable due to the actions of someone else (like an employee or agent) or for not enforcing the agreement on the franchisee, the franchisee is still obligated to indemnify Body20, even if Body20 was grossly negligent or engaged in willful misconduct. This could significantly increase a franchisee's potential liabilities.