What costs are Casiola franchisees obligated to cover when indemnifying the Franchisor Indemnified Parties?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee and each Owner shall indemnify, defend through counsel acceptable to Franchisor, and hold Franchisor, Franchisor's affiliates, and their respective officers, directors, shareholders, members, owners, partners, agents, representatives, independent contractors, employees, assigns and successors (the "Franchisor Indemnified Parties") harmless from all losses, expenses, claims, causes of action, lawsuits, liabilities, taxes, costs, demands, proceedings, investigations, hearings, and/or damages arising out of, or relating to, the Franchised Business (including, without limitation, the ownership and operation of the Franchised Business), unless such loss, expense, claim, cause of action, lawsuit, liability, tax, cost, demand, proceeding, or damage is solely due to Franchisor's gross negligence, and Franchisee shall pay all of the Franchisor Indemnified Parties' reasonable costs, fees and expenses of defending any such claim, cause of action, lawsuit, demand, proceeding, investigation, and/or hearing brought against any of the Franchisor Indemnified Parties or any such claim, cause of action, lawsuit, demand, proceeding, investigation, and/or hearing in which any of the Franchisor Indemnified Parties is named as a party, including, without limitation, reasonable accountant fees, attorney fees, and expert witness fees, court costs, deposition fees, travel expenses and other litigation expenses. At the expense and risk of Franchisee and each Owner, Franchisor may elect to assume (but is not obligated to undertake) the defense and/or settlement of any action, lawsuit, proceeding, claim, or demand. Such an election by Franchisor to assume its defense shall not diminish the obligation of Franchisee and each Owner to indemnify, defend and hold harmless Franchisor. Franchisee and each Owner acknowledge and agree that the terms of this Article 10.B. shall survive the termination, expiration or Transfer of this Agreement. Franchisor Indemnified Parties are not required or obligated to seek recovery from third parties or otherwise mitigate their respective losses in order to maintain a claim against Franchisee or any Owner. Franchisee and each of the Owners agree that Franchisor's failure to pursue recovery or mitigate loss in no way reduces the amounts recoverable from Franchisee or any Owner.
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, franchisees must indemnify, defend, and hold harmless the Franchisor Indemnified Parties from losses, expenses, claims, causes of action, lawsuits, liabilities, taxes, costs, demands, proceedings, investigations, hearings, and/or damages arising out of or relating to the Franchised Business. This broad obligation includes the ownership and operation of the Franchised Business, unless such issues are solely due to Casiola's gross negligence. This means a franchisee is responsible for a wide array of potential costs associated with running the business, shifting much of the risk from Casiola to the franchisee.
The franchisee's obligation extends to paying all reasonable costs, fees, and expenses for defending against any claim, cause of action, lawsuit, demand, proceeding, investigation, and/or hearing brought against the Franchisor Indemnified Parties. These costs include, but are not limited to, reasonable accountant fees, attorney fees, expert witness fees, court costs, deposition fees, travel expenses, and other litigation expenses. This could potentially create a significant financial burden for the franchisee, especially if faced with protracted legal battles.
Casiola retains the right to assume the defense and/or settlement of any action, lawsuit, proceeding, claim, or demand at the franchisee's expense and risk, but is not obligated to do so. Even if Casiola assumes the defense, the franchisee's obligation to indemnify, defend, and hold harmless Casiola remains in effect. The Franchisor Indemnified Parties are not required to seek recovery from third parties or mitigate their losses before making a claim against the franchisee or any owner. This means Casiola can immediately seek full compensation from the franchisee without first attempting to minimize the damages through other means.
The terms of indemnification survive the termination, expiration, or transfer of the Franchise Agreement, meaning that even after the franchise relationship ends, the franchisee may still be liable for past issues. Franchisees and owners also agree that Casiola's failure to pursue recovery or mitigate loss does not reduce the amounts recoverable from them. This places a significant responsibility on the franchisee to manage the business in a way that minimizes potential liabilities and to be prepared for potentially substantial legal and financial obligations.