Does the Carvel indemnification obligation extend to claims of noncompliance with any law?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
l be before your Opening Date if we have already established such a Purchasing Program), (ii) remain a member in good standing thereof throughout the Term, and (iii) pay all reasonable membership fees assessed by any Purchasing Program. Any membership fees set by us or our affiliates will not exceed 110% of our or our affiliates' actual costs and expenses related to such programs.
- 12.12 Prices. We reserve the right, to the fullest extent allowed by applicable law, to establish maximum, minimum, or other pricing requirements with respect to the prices you may charge for Approved Products, including required participation in system-wide discount programs and promotions. If we do not establish such pricing requirements, then you will have the right to determine the prices you charge.
13. INDEMNIFICATION; INSURANCE
13.1 Indemnification.
- A. Indemnification Obligation. You must defend, indemnify, and hold harmless us and our affiliates, our and their permitted successors and assigns, and each of our and their respective direct and indirect owners, directors, officers, managers, employees, agents, attorneys, and representatives (collectively, the "Indemnified Parties") from and against all Losses (defined below), which any of the Indemnified Parties may suffer, sustain, or incur as a result of a claim asserted or inquiry made formally or informally, or a legal action, investigation, or other proceeding brought, by a third party and directly or indirectly arising out of or relating to: (i) the operation of the Franchised Business; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any Law; or (v) any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees. "Losses" include all obligations, liabilities, damages (actual, consequential, or otherwise), and reasonable defense costs that any Indemnified Party incurs. Defense costs include arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced.
- B. Indemnification Procedure. We will promptly notify you of any claim that may give rise to a claim of indemnity hereunder, provided, however, that the failure to provide such notice shall not release you from your indemnification obligations under this Section 13.1, except to the extent you are actually and materially prejudiced by such failure. You shall have the right, upon written notice delivered to the Indemnified Party within 15 days thereafter assuming full responsibility for Losses resulting from such claim, to assume and control the defense of such claim, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, the franchisee's indemnification obligation does extend to claims of noncompliance with any law. Specifically, Carvel requires franchisees to defend, indemnify, and hold harmless Carvel and its affiliates from any losses resulting from third-party claims arising out of the franchisee's noncompliance or alleged noncompliance with any law. This means that if a Carvel franchisee is accused of violating a law, the franchisee may be responsible for covering Carvel's legal costs and any damages Carvel incurs as a result.
The term "Losses" is broadly defined to include all obligations, liabilities, damages (both actual and consequential), and reasonable defense costs, including attorney's fees and costs of investigation. This broad definition means that the franchisee's financial responsibility could potentially be significant if a claim arises. Carvel will promptly notify the franchisee of any claim that may give rise to a claim of indemnity. However, the failure to provide such notice does not release the franchisee from their indemnification obligations except to the extent the franchisee is materially prejudiced by such failure.
The franchisee is not required to indemnify Carvel for losses caused solely and directly by Carvel's gross negligence, willful misconduct, or willful wrongful omissions, provided this is determined by a court or arbitrator. However, this exception does not limit the franchisee's obligation to defend Carvel against such claims. The franchisee's indemnification obligations continue even after the franchise agreement expires or terminates. Carvel is not required to seek recovery from any insurer or mitigate its losses before making a claim against the franchisee under the indemnification provision.