Does a negligent act by an employee of the Developer require the Developer Parties to indemnify the Chatime Group?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
8 Indemnity and Limitation of Liability
8.1 Indemnity
- (1) Developer 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 Developer 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) Developer's taxes, liabilities or Costs of Developer's Operation;
- (g) Any negligent or willful act or omission of Developer, its employees, agents, servants, or contractors; and
- (h) Any warranty, promise or representation made by Developer Parties or any employee, agent, or other person acting on behalf of Developer 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 Developer'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, the Developer Parties are required to indemnify the Chatime Group against losses, liabilities, legal costs, and other expenses that arise directly or indirectly from any negligent or willful act or omission of the Developer, its employees, agents, servants, or contractors. This means that if an employee of the Developer acts negligently and causes harm or incurs costs, the Developer Parties are responsible for compensating the Chatime Group for those damages.
This indemnity extends to various scenarios, including breaches of the Development Agreement, injuries or property loss on the premises, the Developer's taxes and liabilities, and any incomplete, inaccurate, or misleading warranties or representations made by the Developer Parties or their representatives. The indemnity obligation is broad, covering any actions or failures to act that lead to damages or costs for the Chatime Group.
This requirement is a significant obligation for the Developer, as it makes them financially responsible for the actions of their employees and other representatives. It is important for prospective Developers to understand the scope of this indemnity and to ensure they have adequate insurance coverage and internal controls to mitigate the risk of negligent acts or omissions by their staff. The Developer's responsibility to indemnify Chatime Group remains even if the Franchise or any Collateral Agreement is terminated, or if Chatime accepts the Developer's repudiation of the agreement.