Under what circumstances is a Chocolate Fish Coffee franchisee NOT obligated to indemnify an Indemnitee?
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.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, a franchisee is generally required to indemnify Chocolate Fish Franchising and related parties (Indemnitees) against losses arising from the operation of the business. However, there is an exception to this rule.
Specifically, the franchisee is not obligated to indemnify an Indemnitee from actions that arise as a result of the Indemnitee's intentional misconduct or negligence. This means that if Chocolate Fish Coffee or its related parties are directly responsible for losses due to their own intentional misconduct or negligence, the franchisee is not required to cover those losses.
It's important to note that any delay or failure by an Indemnitee to notify the franchisee of an action does not relieve the franchisee of their indemnity obligation unless the delay materially prejudices the franchisee. Additionally, the franchisee cannot settle an action without the Indemnitee's consent. This indemnity agreement remains in effect even after the franchise agreement ends, highlighting the long-term implications for the franchisee.