Under what circumstances is the Chicken Guy franchisee NOT required to indemnify the Indemnitees?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- A. Franchisee and all guarantors of Franchisee's obligations under this Agreement shall, at all times, indemnify, defend (with counsel reasonably acceptable to Chicken Guy), and hold harmless (to the fullest extent permitted by law) Chicken Guy and its affiliates, and their respective successors, assigns, past and present stockholders, directors, officers, employees, agents and representatives (collectively "Indemnitees") from and against all "losses and expenses" (as defined below) incurred in connection with any action, suit, proceeding, claim, demand, investigation, inquiry (formal or informal), judgment or appeal thereof by or against Indemnitees or any settlement thereof (whether or not a formal proceeding or action had been instituted), arising out of or resulting from or connected with Franchisee's (or its employees') operation of the Franchised Restaurant and Franchisee's (or its employees') activities under this Agreement, excluding the gross negligence or willful misconduct of any Indemnitee. Franchisee promptly shall give Chicken Guy written notice of any such action, suit, proceeding, claim, demand, inquiry or investigation filed or instituted against Franchisee and, upon request, shall furnish Chicken Guy with copies of any documents from such matters as Chicken Guy may request.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the franchisee is generally required to indemnify Chicken Guy and its affiliates (referred to as "Indemnitees") against losses and expenses arising from the franchisee's operation of the franchised restaurant. This indemnification covers actions, suits, proceedings, claims, demands, investigations, inquiries, judgments, or appeals related to the franchisee's activities under the Franchise Agreement. This means that if a customer sues Chicken Guy because of something that happened at the franchisee's location, the franchisee would have to cover Chicken Guy's legal costs and any settlement or judgment.
However, the franchisee is not required to indemnify the Indemnitees if the losses and expenses arise from the gross negligence or willful misconduct of any Indemnitee. In other words, if Chicken Guy itself is grossly negligent or engages in willful misconduct that leads to a claim or loss, the franchisee does not have to cover those costs.
This exception is important for prospective franchisees because it provides some protection against being held liable for Chicken Guy's own actions. However, the terms "gross negligence" and "willful misconduct" can be difficult to prove, so franchisees should carefully document any incidents that could potentially fall under this exception. Franchisees are also required to promptly notify Chicken Guy of any action, suit, proceeding, claim, demand, inquiry, or investigation filed against them and provide copies of relevant documents upon request.