Can a Bombs Away franchisee settle an Action without the Indemnitee's consent?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall indemnify and defend (with counsel reasonably acceptable to Bombs Away Franchising) Bombs Away Franchising, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against Bombs Away Franchising and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
- 16.2 Assumption. An Indemnitee may elect to assume the defense of any Action subject to this indemnification and control all aspects of defending the Action (including negotiations and settlement), at Franchisee's expense. Such an undertaking shall not diminish Franchisee's obligation to indemnify the Indemnitees.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, a franchisee is not allowed to settle an Action without the consent of the Indemnitee. The Indemnitee refers to Bombs Away Franchising, its parent entities, subsidiaries, affiliates, and their respective owners, directors, officers, employees, agents, successors, and assignees.
This means that if a claim or lawsuit arises related to the Bombs Away franchise's operations, the franchisee cannot independently decide to settle the matter. They must obtain consent from Bombs Away, ensuring that the franchisor is in agreement with the terms of the settlement. This provision protects Bombs Away's interests and reputation, as settlements can have broader implications beyond the individual franchise unit.
However, Bombs Away also has the option to assume the defense of any Action and control all aspects of defending the Action, including negotiations and settlement, at the franchisee's expense. This does not diminish the franchisee's obligation to indemnify the Indemnitees. This clause ensures Bombs Away can control the legal strategy and outcome of significant claims, while the franchisee remains financially responsible for the associated costs, provided the action does not arise as a result of any Indemnitee's intentional misconduct or negligence. This indemnity will continue in effect after the Franchise Agreement ends.