Under what circumstances is a Chatime franchisee required to reimburse the franchisor for legal costs?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Guarantor, or their Interested Parties breaches clause 9.2 or 9.3, Franchisee must account for and pay to Franchisor all compensation, profits, monies, accruals, increments, or other benefits derived or received as a result of any such breach.
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.
10.2 Limitation of Liability
To the extent permitted by law, Franchisor will have no liability in relation to:
- (1) Any approval of premises or a site for the Outlet provided by Franchisor to Franchisee pursuant to the terms of this Agreement;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Chatime for legal costs under certain circumstances. Specifically, the franchisee must indemnify Chatime and its affiliates against all losses, liabilities, legal costs, and other expenses incurred in connection with any demand, action, arbitration, or other proceeding. This obligation arises directly or indirectly from several situations.
These situations include a breach of the Franchise Agreement or any Collateral Agreement by the franchisee. It also includes any injury to a person or loss of property on the premises of the franchised business, the franchisee's taxes, liabilities, or costs related to the franchised business, or any negligent or willful act or omission by the franchisee, its employees, agents, or contractors. Furthermore, the franchisee is responsible for legal costs resulting from any incomplete, inaccurate, or misleading warranty, promise, or representation made by the franchisee or anyone acting on their behalf.
In North Dakota, the language in Clause 25.9 of the Franchise Agreement under the heading "Costs and Expenses" is replaced with specific conditions where the prevailing party must pay or reimburse the non-prevailing party for all costs, including legal costs. These conditions include any default by the franchisee in observing or performing their obligations, any termination of the agreement, and the enforcement, preservation, or exercise of any right under the agreement, including obtaining advice or information about rights arising from a breach of the agreement by the franchisee. This amendment clarifies the circumstances under which legal cost reimbursement is required in North Dakota, providing more specific guidelines for franchisees operating in that state.