What is the Carvel franchisee's responsibility to keep Carvel informed about the status of the defense of any claim?

According to Carvel's 2025 Franchise Disclosure Document, Carvel will promptly notify the franchisee of any claim that may give rise to a claim of indemnity. However, the franchisee's indemnification obligations remain even if Carvel fails to provide such notice, unless the franchisee is actually and materially prejudiced by the lack of notification. This means that Carvel franchisees are expected to indemnify Carvel for losses resulting from the operation of the franchised business, any business conducted under the agreement, breaches of the agreement, noncompliance with laws, or allegations that Carvel is a joint employer responsible for the franchisee's employees' actions.

This indemnification extends to all obligations, liabilities, damages, and reasonable defense costs incurred by Carvel. Defense costs include fees for arbitrators, attorneys, and expert witnesses, as well as costs for investigation, proof of facts, court costs, travel, living expenses, and other litigation-related expenses. This applies regardless of whether litigation, arbitration, or alternative dispute resolution is formally initiated.

In practical terms, a Carvel franchisee needs to be aware that they could be responsible for covering Carvel's legal costs and damages in various situations. It is crucial for franchisees to maintain thorough records, comply with all applicable laws, and operate their business responsibly to minimize the risk of claims that could trigger the indemnification clause. Franchisees should also ensure they have adequate insurance coverage to protect themselves against potential liabilities. The franchisee should also be prepared to respond promptly and thoroughly to any notices from Carvel regarding potential claims, as their failure to do so could negatively impact their defense.