Does Brown have to seek recovery from third parties 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 claiming indemnification from a franchisee. The agreement explicitly states that Browns Chicken is not obligated to pursue recovery from other sources to maintain an indemnification claim against the franchisee. Furthermore, the failure to seek such recovery or mitigate losses will not reduce the amount recoverable from the franchisee.
This provision means that if Browns Chicken incurs losses or expenses due to a franchisee's actions (such as unauthorized use of trademarks, violation of laws, or issues related to the store's operation), Browns Chicken can seek full indemnification from the franchisee without first attempting to recover those losses from other parties. This places a significant responsibility on the franchisee to ensure compliance with all applicable laws and Browns Chicken's operational standards.
For a prospective Browns Chicken franchisee, this clause highlights the importance of understanding and adhering to the franchise agreement. Failure to do so could result in the franchisee being liable for substantial losses incurred by Browns Chicken, even if there are other potential sources of recovery. It is crucial for franchisees to maintain adequate insurance coverage and implement robust risk management practices to protect themselves from potential indemnification claims. Franchisees should consult with legal and financial advisors to fully understand the implications of this indemnification clause and to develop strategies for mitigating their risk.