Under what conditions can the Indemnified Party join in the defense of a claim against Carls Jr.?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
The Indemnified Party may, at its own expense, join in the defense with counsel of its choice.
The Indemnifying Party may not enter into a settlement unless it (i) involves only the payment of monetary damages by the Indemnifying Party, and (ii) includes a complete release of liability in favor of the Indemnified Party; any other settlement will be subject to the written consent of the Indemnified Party (not to be unreasonably withheld).
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 FDD, the Indemnified Party may join in the defense of a claim with counsel of its choice, but at its own expense. The Indemnifying Party has primary control of the defense and negotiations for settlement.
This means that while Carls Jr. franchisees are entitled to participate in the defense of a claim where they are indemnified, they must bear the cost of their own legal representation if they choose to do so. Carls Jr. retains the primary authority in managing the defense and settlement negotiations.
This arrangement is fairly typical in franchise agreements, where the franchisor often takes the lead in legal matters to ensure a consistent defense strategy. However, the franchisee's right to join the defense allows them to protect their interests, even if they have to pay for their own counsel. Franchisees should carefully consider this provision and budget accordingly, as legal disputes can arise unexpectedly.
Carls Jr. also cannot enter into a settlement unless it involves only the payment of monetary damages by the Indemnifying Party and includes a complete release of liability in favor of the Indemnified Party; any other settlement will be subject to the written consent of the Indemnified Party, which cannot be unreasonably withheld.