Who is responsible for choosing the legal counsel when I must indemnify and defend Chocolate Bash?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Our out-of-pocket | When billed | We may cure your non-compliance on | |
| costs and internal | your behalf (for example, if you do not | ||
| cost allocation, plus | have required insurance, we may purchase | ||
| 10% | insurance for you), and you will owe our | ||
| costs plus a 10% administrative fee. | |||
| When transfer | Payable if you sell your business. | ||
| occurs | |||
| An amount equal to | On demand | ||
| royalty fees and | |||
| marketing fund | |||
| contributions for the | |||
| lesser of (i) 2 years | |||
| or (ii) the remaining | |||
| weeks of the | |||
| franchise term. | |||
| Our costs and losses | You must indemnify and defend (with | ||
| from any legal | counsel reasonably acceptable to us) us | ||
| action related to the | and our affiliates against all losses in any | ||
| operation of your | action by or against us related to, or | ||
| franchise | alleged to arise out of, the operation of | ||
| your franchise (unless caused by our | |||
| misconduct or negligence). | |||
| Our attorney fees, | In any legal proceeding (including | ||
| court costs, and | arbitration), the losing party must pay the | ||
| other expenses of a | prevailing party’s attorney fees, court | ||
| legal proceeding, if | costs and other expenses. | ||
| we are the prevailing | |||
| party |
Source: Item 6 — OTHER FEES (FDD pages 9–13)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, if a franchisee is required to indemnify and defend Chocolate Bash in a legal action related to the operation of their franchise, the franchisee is responsible for selecting legal counsel. However, Chocolate Bash retains the right to reasonably approve the chosen counsel. This means that while the franchisee has the initial choice, Chocolate Bash can reject a particular attorney or firm if they deem them unsuitable.
This requirement protects Chocolate Bash by ensuring that the legal representation is competent and aligned with their interests in the legal matter. The franchisee is responsible for covering Chocolate Bash's costs and losses from any legal action related to the operation of the franchise. This obligation does not apply if the legal action is caused by Chocolate Bash's misconduct or negligence.
In the event of any legal proceeding, including arbitration, the FDD states that the losing party is responsible for covering the prevailing party's attorney fees, court costs, and other related expenses. This provision further emphasizes the financial responsibility franchisees may face in legal disputes, making the selection of appropriate legal counsel even more critical.
Prospective franchisees should carefully consider this obligation and discuss with Chocolate Bash what criteria they use to determine whether counsel is "reasonably acceptable." Understanding these criteria can help franchisees make informed decisions when selecting legal representation and managing potential legal risks associated with operating a Chocolate Bash franchise.