What do 'Legal Costs' include for the Chatime franchisor?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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 must indemnify Chatime and its affiliates (Chatime Group) against all losses and liabilities incurred by the Chatime Group. This also extends to all legal costs and other costs and expenses incurred by the Chatime Group. These costs are in connection with a demand, action, arbitration, or other proceeding, including mediation, compromise, out-of-court settlement, or appeal.
These legal costs arise directly or indirectly as a result of or in connection with several factors. These include a breach by the franchisee parties of the Franchise Agreement or any Collateral Agreement. They also include any injury to or loss of property of any person on the premises where the business is conducted. Further, the legal costs can stem from the franchisee's taxes, liabilities, or costs of the franchised business, or any negligent or willful act or omission of the franchisee, its employees, agents, servants, or contractors.
Finally, legal costs may arise from 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. This broad indemnity clause means that franchisees could be responsible for a wide range of legal expenses incurred by Chatime, depending on the specific circumstances and the interpretation of these clauses.