How does the indemnification obligation for Chesters franchisees (Item 7) relate to the franchisee's obligation to comply with applicable laws (Item 8)?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Obligation | Section in agreement | Disclosure document item | |
|---|---|---|---|
| p. | Indemnification | 22 of Agreement | 6 |
| g. | Compliance with standards and policies/operating manual | 6, 8, 10, and 13 of Agreement | 8, 11, and 14 |
Restaurant Build-Out. You must develop the Restaurant in compliance with our System and ensure that all plans and specifications comply with our requirements, applicable laws, and lease requirements.
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- Indemnification.
Any provision in the franchise agreement or related agreements requiring the franchise eto indemnify, reimburse, defend, or hold harmless the franchisor or other parties is hereby modified such that the franchisee has no obligation to indemnify, reimburse, defend, or hold harmless the franchisor or any other indemnified party for losses or liabilities to the extent that they are caused by the indemnified party's negligence, willful misconduct, strict liability, or fraud.
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Item 9 lists franchisee obligations, referencing both indemnification and compliance with standards and policies. Specifically, the table shows that indemnification is detailed in Section 22 of the Franchise Agreement and compliance with standards and policies/operating manual is found in Sections 6, 8, 10, and 13 of the Agreement.
Item 8 states that franchisees must develop their restaurants in compliance with Chesters's system standards, ensuring that all plans and specifications adhere to Chesters's requirements, applicable laws, and lease requirements. This means a Chesters franchisee is responsible for ensuring their restaurant's construction and operation meet all legal and regulatory standards.
Item 23 includes a modification for franchisees in Washington state regarding indemnification. This addendum states that any provision requiring a franchisee to indemnify Chesters is modified such that the franchisee is not obligated to indemnify Chesters for losses or liabilities caused by Chesters's negligence, willful misconduct, strict liability, or fraud. This modification provides some protection to franchisees in Washington, limiting their indemnification obligations to situations where they are at fault, and not for Chesters's own actions.
In summary, while franchisees have a general obligation to indemnify Chesters, this obligation is tied to their duty to comply with all applicable laws and standards. The Washington state addendum provides a specific exception, protecting franchisees from liability arising from Chesters's misconduct. Prospective franchisees should carefully review the franchise agreement and any state-specific addenda to fully understand their indemnification obligations and how they relate to compliance with applicable laws.