Is Browns Chicken required to indemnify the franchisee for losses resulting from actions connected to the execution of any check, EFT, draft or order, regardless of its authenticity?
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 Browns Chicken's 2025 Franchise Disclosure Document, Browns Chicken does not indemnify the franchisee; instead, the bank that the franchisee uses will indemnify Browns Chicken. Browns Chicken requires franchisees to make payments of royalty fees, advertising fund contributions, and other payments through a Bank Draft Plan.
As part of this plan, the franchisee's bank agrees to comply with the authorization form. In return, Browns Chicken agrees to indemnify the bank and hold it harmless from any loss the bank may suffer as a consequence of its actions related to the execution of any check, EFT, draft, or order, regardless of its authenticity. This indemnification covers any costs or expenses the bank reasonably incurs.
Browns Chicken also agrees to indemnify the bank for any loss if any check, EFT, draft, or order is dishonored, whether with or without cause, intentionally or inadvertently. Additionally, Browns Chicken will defend any action brought against the bank by any depositor or other person due to the bank's actions taken in response to the authorization form.
This arrangement protects the bank from potential losses or liabilities arising from processing payments for the Browns Chicken franchise, ensuring that the bank is covered for any issues related to the authenticity or honoring of payment instruments. The franchisee is required to use this Bank Draft Plan, so understanding this indemnification agreement is crucial for managing their financial transactions with Browns Chicken.