Is there a limit to the number of separate counsels that a Carvel franchisee is obligated to pay for in an indemnification claim?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
If (i) the Indemnified Party shall have been advised by counsel that there are one or more legal or equitable defenses available to it that are different from or in addition to those available to you and, in the reasonable opinion of the Indemnified Party, the counsel that you have selected could not adequately represent the interests of the Indemnified Party because such interests could be in conflict with your interests, (ii) you do not assume responsibility for such Losses in a timely manner, (iii) the claim involves any elements of the Intellectual Property, or (iv) you fail to defend a claim with counsel reasonably satisfactory to the Indemnified Party as contemplated above, then the Indemnified Party shall have the right to assume the defense of any claims and employ counsel of its own choosing and you shall pay the reasonable fees and disbursements of such Indemnified Party's counsel as incurred; provided that in any case, you shall not be obligated to pay the expenses of more than one separate counsel for all Indemnified Parties taken together.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, a franchisee is typically responsible for defending, indemnifying, and holding harmless Carvel and its affiliates against losses resulting from claims related to the operation of the franchised business. These losses can include obligations, liabilities, damages, and reasonable defense costs, such as attorney's fees. However, the franchisee is not obligated to cover losses caused by the negligence, willful misconduct, strict liability, or fraud of the indemnified party.
If a claim arises, the franchisee has the right to assume control of the defense by providing written notice within 15 days and employing counsel reasonably satisfactory to Carvel. However, Carvel has the right to assume the defense and employ its own counsel if certain conditions are met. These conditions include situations where Carvel's counsel advises that there are different or additional defenses available to Carvel, the franchisee does not assume responsibility in a timely manner, the claim involves intellectual property, or the franchisee fails to defend the claim with satisfactory counsel.
In such instances where Carvel assumes the defense, the franchisee is obligated to pay the reasonable fees and disbursements of Carvel's counsel. However, the FDD stipulates that the franchisee is not obligated to pay the expenses of more than one separate counsel for all indemnified parties taken together. This provision protects the franchisee from potentially incurring excessive legal fees if multiple indemnified parties choose to retain separate counsel. Both parties are expected to cooperate in good faith regarding the defense of any claim.