Under what circumstances will a Chesters franchisee be required to pay an indemnification fee?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of fee* | Amount | Due Date | Remarks |
|---|---|---|---|
| Indemnification | Will vary under circumstances | As incurred | You must reimburse us if we are held liable for claims from your Restaurant’s operation or incur costs in defending them. |
Source: Item 6 — OTHER FEES (FDD pages 14–16)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, an indemnification fee is required if Chesters is held liable for claims arising from the franchisee's restaurant operations or if Chesters incurs costs defending against such claims. The amount of the indemnification fee will vary depending on the specific circumstances. This fee is due as it is incurred.
In practical terms, this means that if a customer sues Chesters because of something that happened at a franchisee's restaurant (for example, a slip-and-fall incident or food poisoning), and Chesters is found liable or incurs legal expenses, the franchisee will have to reimburse Chesters for those costs. This is a common provision in franchise agreements, designed to protect the franchisor from liabilities caused by the actions of individual franchisees.
Prospective Chesters franchisees should carefully consider this indemnification clause and ensure they have adequate insurance coverage to protect themselves against potential claims. It would be prudent to discuss with an attorney and insurance professional the types of claims that could trigger this fee and how best to mitigate the risk. Understanding the scope of this obligation is crucial for managing the financial risks associated with operating a Chesters franchise.