What is the Chocolate Fish Coffee franchisee's obligation regarding legal counsel when indemnifying?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.1 Indemnity. Franchisee shall indemnify and defend (with counsel reasonably acceptable to Chocolate Fish Franchising) Chocolate Fish 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 Chocolate Fish 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.
- 16.2 Assumption. An Indemnitee may elect to assume the defense of any Action subject to this indemnification, and control all aspects of defending the Action, including negotiations and settlement, at Franchisee's expense. Such an undertaking shall not diminish Franchisee's obligation to indemnify the Indemnitees.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, a Chocolate Fish Coffee franchisee is obligated to indemnify and defend Chocolate Fish Franchising against losses related to the operation of the business. This defense must be conducted with legal counsel that is reasonably acceptable to Chocolate Fish Franchising. This means that while the franchisee is responsible for providing a defense, Chocolate Fish Coffee has the right to approve the franchisee's choice of attorney.
However, the franchisee is not required to indemnify Chocolate Fish Coffee for actions arising from the franchisor's intentional misconduct or negligence. Additionally, any delay or failure by Chocolate Fish Coffee to notify the franchisee of an action does not relieve the franchisee of their indemnity obligation, except if the delay materially prejudices the franchisee's ability to defend the action. The franchisee is also prohibited from settling any action without the consent of Chocolate Fish Coffee.
Chocolate Fish Coffee also retains the right to assume the defense of any action subject to indemnification, controlling all aspects of the defense, including negotiations and settlement, at the franchisee's expense. This assumption of defense by Chocolate Fish Coffee does not diminish the franchisee's obligation to indemnify them. This clause ensures that Chocolate Fish Coffee can protect its interests and brand reputation in legal matters related to the franchisee's business operations, while the franchisee ultimately bears the financial responsibility unless the issue stems from Chocolate Fish Coffee's actions.