How does the indemnification obligation for Chesters franchisees (Item 7) relate to the franchisor's lack of obligation to provide assistance (Item 11)?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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- Attorneys' Fees. If the franchise agreement or related agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Item 11 states that Chesters is not required to provide franchisees with any assistance beyond what is listed. This includes pre-opening obligations such as providing information on restaurant layout, reviewing plans, providing initial training, access to confidential manuals, advice on operations, and selling equipment and food items. Continuing obligations include periodic training, advice, point-of-purchase materials, inspections, use of trademarks and confidential information, selling equipment and recommending retail prices. This limited assistance from Chesters could potentially increase a franchisee's risk of liability.
However, Item 23 modifies the standard indemnification clauses in franchise agreements. It specifies that Chesters franchisees are not obligated to indemnify, reimburse, defend, or hold Chesters harmless for losses or liabilities resulting from Chesters's own negligence, willful misconduct, strict liability, or fraud. This modification protects franchisees from bearing the financial burden of Chesters's actions or failures.
In effect, while Chesters offers limited assistance to franchisees, the modification to the indemnification clause in Item 23 provides a degree of protection. Franchisees are not required to cover Chesters's liabilities arising from their own mistakes or misconduct. This balance is important for prospective franchisees to consider, as it clarifies the allocation of risk and responsibility within the franchise relationship.