What is the Casiola franchisee's obligation regarding legal counsel when indemnifying the franchisor?
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, the franchisee is obligated to defend the franchisor through counsel acceptable to Casiola when indemnifying them. This means that if a claim, lawsuit, or other legal action arises out of or relates to the franchised business, the franchisee must hire an attorney to defend Casiola, and that attorney must be approved by Casiola. This obligation extends to the franchisee, each owner, and covers losses, expenses, claims, lawsuits, liabilities, taxes, costs, demands, proceedings, investigations, hearings, and/or damages related to the Franchised Business.
The franchisee is responsible for covering all reasonable costs, fees, and expenses associated with the defense, including accountant fees, attorney fees, expert witness fees, court costs, deposition fees, travel expenses, and other litigation expenses. However, the franchisee's duty to indemnify does not apply if the loss or damage is solely due to Casiola's gross negligence.
Casiola retains the right to assume the defense 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 chooses to assume the defense, the franchisee's obligation to indemnify, defend, and hold harmless Casiola remains in effect. The terms of this indemnification survive the termination, expiration, or transfer of the Franchise Agreement.
The Franchisor Indemnified Parties are not required 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. This could create a significant financial burden for the franchisee, as they are responsible for legal costs and potential damages even if Casiola could have reduced those costs through mitigation.