If Buona receives notice of a claim related to the Franchise Agreement, what is the Franchisee's immediate required action?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Franchisor shall advise Franchisee in the event Franchisor receives notice that a claim has been or may be filed with respect to a matter covered by this Agreement, and Franchisee shall immediately assume the defense thereof at Franchisee's sole cost and expense. In any event, Franchisor will have the right, through counsel of its choice, to control any matter to the extent it could directly or indirectly affect Franchisor and/or its Affiliates or their officers, directors, employees, agents, successors or assigns. If Franchisee fails to assume such defense, Franchisor may defend, settle, and litigate such action in the manner it deems appropriate and Franchisee shall, immediately upon demand, pay to Franchisor all costs (including attorneys' fees and cost of litigation) incurred by Franchisor in effecting such defense, in addition to any sum which Franchisor may pay by reason of any settlement or judgment against Franchisor.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if Buona receives notice of a claim related to the Franchise Agreement, the franchisee must immediately assume the defense of the claim at their own cost and expense. However, Buona retains the right to control any matter that could directly or indirectly affect them, their affiliates, or their personnel through counsel of their choice.
If the franchisee fails to assume the defense, Buona can defend, settle, and litigate the action as they see fit. The franchisee is then required to immediately pay Buona all costs incurred in the defense, including attorney's fees and litigation costs, in addition to any settlement or judgment amounts paid by Buona.
This clause ensures that Buona maintains control over legal matters that could impact the brand and its reputation, even when the claim is directly related to a franchisee's operations. It also protects Buona from potential financial losses due to a franchisee's failure to adequately defend against a claim. The franchisee bears the initial responsibility for the defense but must also be prepared to cover Buona's costs if they fail to do so adequately.