Under what conditions can Buona defend, settle, and litigate an action related to the Franchise Agreement, and what are the Franchisee's obligations in such a case?
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, Buona will advise the franchisee if they receive notice of a claim related to the Franchise Agreement. The franchisee must then immediately assume the defense of the claim at their own expense. However, Buona retains the right to control any matter that could directly or indirectly affect Buona, its affiliates, or their personnel, through counsel of its choice.
If the franchisee fails to assume the defense, Buona can defend, settle, and litigate the action as it deems appropriate. In such cases, the franchisee is obligated to immediately pay Buona all costs incurred, including attorneys' fees and litigation costs, as well as any sums Buona pays due to settlements or judgments against them.
This arrangement places a significant responsibility on the Buona franchisee to handle legal claims promptly and at their own cost. However, it also gives Buona the power to step in and control the litigation if it affects their interests, ensuring they can protect their brand and reputation. The franchisee is then liable for all associated costs, which could potentially be substantial depending on the nature and complexity of the claim.