Is a Bumper Man franchisee required to indemnify the Franchisor against penalties resulting from the franchisee's failure to remit taxes?
Bumper_Man Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISEE, ON ITS BEHALF AND ON BEHALF OF ITS AFFILIATES AND PRINCIPALS, WILL INDEMNIFY, DEFEND AND HOLD HARMLESS THE FRANCHISOR INDEMNITEES AGAINST AND REIMBURSE ANY ONE OR MORE OF THE FRANCHISOR INDEMNITEES FOR ANY AND ALL LOSSES AND EXPENSES ARISING OUT OR FROM OR RELATED TO, ANY CLAIMS, DIRECTLY OR INDIRECTLY, ARISING OUT OR FROM OR RELATED TO: (A) THE OPERATION OR CLOSING OF THE BUMPER BUSINESS; (B) ANY BREACH OF THIS AGREEMENT BY FRANCHISEE, ITS AFFILIATES OR ANY PRINCIPAL, OR FRANCHISEE'S, ITS AFFILIATES' OR ANY PRINCIPAL'S BREACH OF ANY OTHER AGREEMENT BETWEEN FRANCHISOR OR ITS AFFILIATES AND FRANCHISEE, ITS AFFILIATES, (C) THE MARKETING, PROMOTION OR ADVERTISEMENT OF THE BUMPER BUSINESS OR DESIGNATED SERVICES OFFERED BY THE BUMPER BUSINESS, INCLUDING UNFAIR OR FRAUDULENT ADVERTISING CLAIMS (WHETHER IN PRINT ADVERTISING OR ELECTRONIC MEDIA), OR (D) FRANCHISEE'S PERFORMANCE OF BUMPER REPAIR SERVICES FOR ANY INDIVIDUAL CONSUMER.
FRANCHISOR HAS THE RIGHT, AT ITS OPTION, TO DEFEND ANY SUCH CLAIM AGAINST IT AT FRANCHISEE'S SOLE COST AND EXPENSE. IF FRANCHISEE DEFENDS ANY CLAIM, IT MAY NOT ENTER INTO ANY SETTLEMENT AGREEMENT OR OTHERWISE RESOLVE OR CONCLUDE THE MATTER WITHOUT FRANCHISOR'S PRIOR WRITTEN CONSENT. THIS INDEMNITY WILL CONTINUE IN FULL FORCE AND EFFECT SUBSEQUENT TO, AND NOTWITHSTANDING, THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. UNDER NO CIRCUMSTANCES WILL FRANCHISOR OR ANY OTHER FRANCHISOR INDEMNITEES BE REQUIRED TO SEEK RECOVERY FROM ANY INSURER OR OTHER THIRD PARTY, OR OTHERWISE TO MITIGATE ITS OR FRANCHISEE'S LOSSES AND EXPENSES, IN ORDER TO MAINTAIN AND RECOVER FULLY A CLAIM AGAINST FRANCHISEE. ANY FAILURE TO PURSUE SUCH RECOVERY OR MITIGATE A LOSS WILL IN NO WAY REDUCE OR ALTER THE AMOUNTS RECOVERABLE BY FRANCHISOR OR ANOTHER FRANCHISOR INDEMNITEE FROM FRANCHISEE.
Source: Item 23 — RECEIPTS (FDD pages 45–180)
What This Means (2025 FDD)
According to the 2025 Bumper Man Franchise Disclosure Document, a franchisee is required to indemnify, defend, and hold harmless the franchisor against losses and expenses arising from claims related to the operation of the Bumper Business or any breach of the Franchise Agreement. This includes claims that may arise directly or indirectly.
Specifically, the franchisee's duty to indemnify Bumper Man extends to situations where the franchisee fails to comply with the terms of the agreement. This would include the failure to pay income, withholding, service, sales, or any other applicable taxes when due on the Bumper Business' operations. However, there is an exception if the franchisee is contesting the tax liability in good faith and has effectively stayed the enforcement of the tax liability.
This indemnification clause means that if Bumper Man incurs losses or expenses due to the franchisee's failure to pay taxes (and the franchisee is not contesting those taxes in good faith), the franchisee is responsible for covering those costs. This could include penalties, interest, legal fees, and other related expenses. The franchisor has the right to defend any claim at the franchisee's sole cost and expense. This obligation continues even after the termination or expiration of the Franchise Agreement.