Does the indemnity obligation of a Chocolate Bash franchisee continue after the franchise agreement ends?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
14.3 Effect of Termination. Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:
(i) pay all amounts owed to CB Franchising based on the operation of the Business through the effective date of termination or expiration;
16.1 Indemnity. Franchisee shall indemnify and defend (with counsel reasonably acceptable to CB Franchising) CB Franchising, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against CB Franchising and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the franchisee's obligation to indemnify Chocolate Bash continues even after the franchise agreement ends. Specifically, obligations related to indemnity remain in effect after the termination or expiration of the agreement.
This means that even after a Chocolate Bash franchise agreement is terminated or expires, the franchisee may still be responsible for covering losses, damages, or legal expenses that Chocolate Bash incurs due to the franchisee's operation of the business. This obligation extends to Chocolate Bash, its parent entities, subsidiaries, affiliates, and their respective owners, directors, officers, employees, agents, successors, and assignees.
However, the franchisee is not required to indemnify Chocolate Bash for actions arising from Chocolate Bash's intentional misconduct or negligence. Additionally, any delay or failure by Chocolate Bash to notify the franchisee of an action will only relieve the franchisee of their indemnity obligation if the delay materially prejudices the franchisee. The franchisee is also prohibited from settling any action without the consent of Chocolate Bash.
This extended liability is a significant consideration for prospective Chocolate Bash franchisees. It is essential to fully understand the scope of the indemnity obligation and to maintain adequate insurance coverage to mitigate potential risks even after the franchise agreement concludes.