Does the Chatime franchisee indemnity extend to legal costs incurred by the Chatime Group in connection with an arbitration proceeding?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
10 Indemnity and Limitation of Liability
10.1 Indemnity
- (1) Franchisee Parties indemnify Franchisor and each of its Affiliates (Chatime Group) against all:
- (a) Losses incurred by the Chatime Group;
- (b) Liabilities incurred by the Chatime Group; and
- (c) All Legal Costs and other Costs and expenses incurred by the Chatime Group in connection with a demand, action, arbitration, or other proceeding (including mediation, compromise, out of court settlement or appeal),
arising directly or indirectly as a result of or in connection with:
- (d) A breach by Franchisee Parties of this Agreement or any Collateral Agreement;
- (e) Any injury to, or loss of property of, any person in or on premises from which the business is conducted;
- (f) Franchisee's taxes, liabilities or Costs of The Franchised Business;
- (g) Any negligent or willful act or omission of Franchisee, its employees, agents, servants, or contractors; and
- (h) Any warranty, promise, or representation made by Franchisee Parties or any employee, agent, or other person acting on behalf of Franchisee Parties being incomplete, inaccurate, or misleading.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the franchisee's indemnity does extend to legal costs incurred by the Chatime Group in connection with an arbitration proceeding. Specifically, the franchisee is required to indemnify Chatime Group against all losses, liabilities, and legal costs incurred by the Chatime Group. This includes costs and expenses related to any demand, action, arbitration, or other proceeding, including mediation, compromise, out-of-court settlement, or appeal.
This indemnity obligation arises directly or indirectly from several factors. These include a breach of the Franchise Agreement by the franchisee, injury to persons or loss of property on the business premises, the franchisee's taxes, liabilities, or costs, any negligent or willful act or omission by the franchisee or their staff, and any incomplete, inaccurate, or misleading warranty, promise, or representation made by the franchisee.
This means that if Chatime incurs legal costs due to an arbitration proceeding that arises from any of the aforementioned factors, the franchisee is responsible for covering those costs. This is a significant obligation for the franchisee, as legal costs can be substantial. Franchisees should ensure they understand the full scope of their indemnity obligations and maintain adequate insurance coverage to mitigate potential risks. It is also important to note that this indemnity extends to the Chatime Group, which includes Chatime's affiliates, providing broad protection to the franchise system.