Does the indemnity provided by Chatime franchisees extend to the negligent acts of their contractors?
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.
- (2) Franchisor's rights at law and under this Agreement, including its right to be indemnified under this clause, are not affected by:
- (a) Franchisor ending the Franchise or the termination of any Collateral Agreement;
- (b) Franchisor accepting Franchisee's repudiation of this Agreement or any related Agreement; or
- (c) Anything else.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees are required to indemnify Chatime against losses, liabilities, legal costs, and other expenses that the Chatime Group incurs. This indemnity extends to various situations, including breaches of the Franchise Agreement, injuries or property loss on the business premises, the franchisee's taxes and liabilities, and any incomplete, inaccurate, or misleading statements made by the franchisee or their representatives.
Specifically, the indemnity includes coverage for the negligent or willful acts or omissions of the franchisee, their employees, agents, servants, or contractors. This means that if a contractor hired by the Chatime franchisee acts negligently and causes damage or injury, the franchisee is responsible for indemnifying Chatime against any resulting losses or liabilities. This could include legal fees, settlement costs, and any other expenses Chatime incurs as a result of the contractor's actions.
This requirement places a significant responsibility on Chatime franchisees to carefully select and oversee their contractors. Franchisees should ensure that their contractors have adequate insurance coverage and are properly trained to avoid negligent acts or omissions. The franchisee should also understand the terms of their insurance policies to ensure they adequately cover potential liabilities arising from the actions of their contractors. This indemnity obligation remains in effect regardless of whether Chatime terminates the franchise agreement or accepts the franchisee's repudiation of the agreement.