Under what circumstances is a Carls franchisee NOT required to indemnify CJR and its Indemnitees?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee and all guarantors of Franchisee's obligations under this Agreement shall, at all times, indemnify, defend (with counsel reasonably acceptable to CJR), and hold harmless (to the fullest extent permitted by law) CJR and its parents and affiliates, and their respective predecessors, successors, assigns, past and present stockholders, directors, managers, officers, employees, members, agents and representatives (collectively "Indemnitees") from and against all "losses and expenses" (as defined below) incurred in connection with any action, suit, proceeding, claim, demand, investigation, inquiry (formal or informal), judgment or appeal thereof by or against CJR and/or Indemnitees or any settlement thereof (whether or not a formal proceeding or action had been instituted), arising out of or resulting from or connected with Franchisee's activities under this Agreement, excluding the gross negligence or willful misconduct of CJR. Franchisee promptly shall give CJR written notice of any such action, suit, proceeding, claim, demand, inquiry or investigation filed or instituted against Franchisee and, upon request, shall furnish CJR with copies of any documents from such matters as CJR may request.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a franchisee is generally required to indemnify CJR (Carl's Jr. Restaurants LLC) and its Indemnitees against losses and expenses arising from the franchisee's activities under the Franchise Agreement. However, this indemnification requirement does not apply if the losses and expenses are a result of the gross negligence or willful misconduct of CJR itself. This means that Carls franchisees are protected from having to cover CJR's liabilities when CJR is directly responsible for damages through its own gross negligence or intentional misconduct.
This exception is important for prospective Carls franchisees because it limits their financial exposure. While franchisees must protect CJR from liabilities caused by their own actions, they are not responsible for CJR's own serious errors or intentional wrongdoing. This is a fairly standard provision in franchise agreements, as it ensures that each party is accountable for their own actions and negligence.
It is important to note that the franchisee is still responsible for providing written notice to CJR of any action, suit, proceeding, claim, demand, inquiry, or investigation filed against them. CJR also has the option to assume the defense and/or settlement of any claim, but is not obligated to do so. This does not diminish the franchisee's obligation to indemnify and hold harmless CJR and its Indemnitees, unless the cause is due to CJR's gross negligence or willful misconduct.