Under what conditions must I indemnify and defend Chocolate Bash against losses from legal actions?
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). |
Source: Item 6 — OTHER FEES (FDD pages 9–13)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, franchisees are required to indemnify and defend Chocolate Bash and its affiliates against losses from legal actions under specific circumstances. This obligation arises from any legal action related to the operation of the franchise.
Specifically, the franchisee must indemnify and defend Chocolate Bash (using counsel reasonably acceptable to them) against all losses in any action by or against Chocolate Bash that is related to, or alleged to arise out of, the operation of the franchise. This means that if a customer sues Chocolate Bash because of something that happened at the franchisee's location, the franchisee is responsible for covering Chocolate Bash's legal costs and any resulting damages, using an attorney that Chocolate Bash finds acceptable.
However, there is an exception to this requirement. The franchisee is not required to indemnify and defend Chocolate Bash if the legal action is caused by Chocolate Bash's own misconduct or negligence. This provides some protection to the franchisee, ensuring they are not held responsible for issues arising directly from the franchisor's actions. This type of clause is common in franchise agreements, as it protects the franchisor from liabilities arising from the franchisee's day-to-day operations while also including an exception for the franchisor's own actions.