Does Brown have to mitigate its losses before claiming indemnification from a Browns Chicken franchisee?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee will, and hereby does, indemnify and defend Brown and its Affiliates and their respective officers, directors, owners, agents, representatives, employees, successors and assigns, from and against all losses, costs, liabilities, damages, claims, and expenses of every kind, including allegations of negligence by Brown and its Affiliates and their officers, employees, and agents, to the fullest extent permitted by Applicable Law, and including reasonable attorneys' fees, arising out of, resulting from or related to: (i) the unauthorized use of the Trademarks; (ii) the violation of Applicable Law; and (iii) the construction, renovation, upgrading, alteration, remodeling, repair, operation, ownership and use of the BROWN Store. Franchisee must promptly give notice to Brown of any action, suit, proceeding, claim, demand, inquiry, or investigation related to the foregoing. Brown will have the right, through counsel of its choice, at Franchisee's expense, to control the defense and response to any such action, and such undertaking by Brown will not, in any manner, diminish Franchisee's obligations to Brown. Under no circumstances will Brown or a person indemnified be required to seek recovery from third parties or mitigate its losses in order to maintain a claim for indemnification against Franchisee under this Agreement, and the failure to pursue such recovery or mitigate a loss will in no way reduce the amounts recoverable from Franchisee by a person indemnified. Franchisee's obligations under this Section will survive the termination or expiration of this Agreement.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, Browns Chicken is not required to seek recovery from third parties or mitigate its losses before seeking indemnification from a franchisee. The franchise agreement states that Browns Chicken does not have to mitigate losses to maintain a claim for indemnification against the franchisee. Furthermore, the failure to pursue recovery or mitigate a loss will not reduce the amounts recoverable from the franchisee.
This means that if a franchisee's actions lead to a loss for Browns Chicken, and the franchise agreement requires the franchisee to indemnify Browns Chicken, Browns Chicken can immediately seek full compensation from the franchisee without first attempting to minimize the loss through other means. This could include pursuing claims against other responsible parties or taking steps to reduce the financial impact of the loss.
For a prospective Browns Chicken franchisee, this clause creates a significant financial risk. The franchisee could be held fully responsible for losses, even if Browns Chicken could have reduced those losses through reasonable efforts. It is crucial for franchisees to understand the scope of their indemnification obligations and to ensure they have adequate insurance coverage to protect themselves from potential claims. Franchisees should consult with legal and financial advisors to fully understand the implications of this provision.