In the event of a settlement regarding an event for which a Checkersrallys franchisee is providing indemnity, what consent is required from the franchisee?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
We agree to give you reasonable notice of any event of which we become aware for which indemnification may be required, and we may elect (but are not obligated) to direct the defense thereof, including the selection of appropriate counsel at our sole determination. We may, in our reasonable discretion, take such actions as we deem necessary and appropriate to investigate, defend, or settle any event or take other remedial or corrective actions with respect thereto as may be necessary for the protection of indemnitees or Restaurants generally, provided however, that any settlement shall be subject to your consent, which consent shall not be unreasonably withheld or delayed. Further, notwithstanding the foregoing, if the insurer on a policy or policies obtained in compliance with your Franchise Agreement agrees to undertake the defense of an event (an "Insured Event"), we agree not to exercise our right to select counsel to defend the event if such would cause your insurer to deny coverage. We reserve the right to retain counsel to represent us with respect to an Insured Event at our sole cost and expense. This Section shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, if Checkersrallys chooses to settle an event for which a franchisee is providing indemnity, the settlement is subject to the franchisee's consent. However, the franchisee cannot unreasonably withhold or delay that consent.
This means that while Checkersrallys has the authority to investigate, defend, or settle any event they deem necessary for the protection of the indemnitees or restaurants, they must obtain the franchisee's approval before finalizing any settlement. This provision aims to protect the franchisee from potentially unfair or unfavorable settlement terms.
However, the FDD also states that if an insurer agrees to undertake the defense of an event, Checkersrallys will not exercise its right to select counsel if it would cause the franchisee's insurer to deny coverage. Checkersrallys retains the right to hire counsel to represent them regarding an insured event at their own cost. This section regarding indemnity remains in effect even after the agreement expires or terminates.