Is the bank liable if a check or EFT is not honored for a Browns Chicken franchise?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Drawee Bank Please Note: There is an Indemnification Agreement below.
Indemnification Agreement
To the Bank Designated:
In consideration of your compliance with the request and authorization printed on the Authorization Form hereof, the Payee agrees with respect to any such action:
- (1) To Indemnify you and hold you harmless from any loss you may suffer as a consequence of your actions resulting from or in connection with the execution and issuance of any check, EFT, draft or order, whether or not genuine, purporting to be executed by the Payee and received by you in the regular course of business for the purpose of payment, including any costs or expenses reasonably incurred in connection herewith.
- (2) To Indemnify you for any loss arising in the event that any such check, EFT, draft or order shall be dishonored, whether with or without cause and whether intentionally or inadvertently.
- (3) To defend at our own cost any action which might be brought by any depositor or any other persons because of your actions taken pursuant to the foregoing request, or in any manner arising by reason of your participation.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to the 2025 Browns Chicken Franchise Disclosure Document, the bank is not liable if a check or EFT is not honored. Instead, Browns Chicken requires franchisees to sign an indemnification agreement protecting the bank.
The indemnification agreement states that the franchisee, as the payee, will indemnify the bank and hold it harmless from any losses the bank may suffer as a consequence of actions resulting from the execution and issuance of any check, EFT, draft, or order. This includes any costs or expenses incurred in connection with these actions. The franchisee also agrees to indemnify the bank for any loss arising if any check, EFT, draft, or order is dishonored, regardless of the reason for the dishonor.
Furthermore, the franchisee agrees to defend, at their own cost, any action brought by any depositor or other persons against the bank because of actions taken by the bank related to the authorization. This means that the franchisee bears the financial responsibility for any legal challenges arising from the bank's compliance with the payment authorization.
This arrangement is designed to protect the bank from liability and ensures that Browns Chicken franchisees are responsible for managing their accounts and ensuring sufficient funds are available for payments to Browns Chicken.