What rights does the Cinnabon franchisor have if the franchisee assumes the defense of a claim?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
You shall have the right, upon written notice delivered to the Indemnified Party within 15 days thereafter assuming full responsibility for Losses resulting from such claim, to assume and control the defense of such claim, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel.
If (i) the Indemnified Party shall have been advised by counsel that there are one or more legal or equitable defenses available to it that are different from or in addition to those available to you and, in the reasonable opinion of the Indemnified Party, the counsel that you have selected could not adequately represent the interests of the Indemnified Party because such interests could be in conflict with your interests, (ii) you do not assume responsibility for such Losses in a timely manner, (iii) the claim involves any elements of the Intellectual Property, or (iv) you fail to defend a claim with counsel reasonably satisfactory to the Indemnified Party as contemplated above, then the Indemnified Party shall have the right to assume the defense of any claims and employ counsel of its own choosing and you shall pay the reasonable fees and disbursements of such Indemnified Party's counsel as incurred; provided that in any case, you shall not be obligated to pay the expenses of more than one separate counsel for all Indemnified Parties taken together.
In connection with any claim, the Indemnified Party or you, whichever is not assuming the defense of such claim, shall have the right to participate in such claim and to retain its own counsel at such party's own expense.
- C.
Cooperation and Settlement.
You or the Indemnified Party (as the case may be) shall keep you or the Indemnified Party (as the case may be) reasonably apprised of, and shall respond to any reasonable requests concerning, the status of the defense of any claim of which it is maintaining and shall cooperate in good faith with each other with respect to the defense of any such claim.
You shall not, without the prior written consent of the Indemnified Parties, (a) settle or compromise any claim or consent to the entry of any judgment with respect to any claim which does not include a written release from liability of such claim for the Indemnified Parties, or (b) settle or compromise any claim in any manner that may adversely affect the Indemnified
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, if a franchisee assumes the defense of a claim, Cinnabon retains certain rights to protect its interests. The franchisee must provide written notice to Cinnabon within 15 days of assuming responsibility for losses resulting from the claim. The franchisee is then responsible for controlling the defense, including hiring counsel reasonably satisfactory to Cinnabon and covering all associated fees.
However, Cinnabon has the right to assume the defense under specific circumstances. These include situations where Cinnabon's counsel advises that it has distinct legal defenses from the franchisee, the franchisee fails to assume responsibility promptly, the claim involves Cinnabon's intellectual property, or the franchisee's chosen counsel is not reasonably satisfactory to Cinnabon. If any of these conditions are met, Cinnabon can take over the defense and choose its own counsel, with the franchisee responsible for covering the reasonable fees and disbursements. It is important to note that the franchisee will not be obligated to pay the expenses of more than one separate counsel for all indemnified parties taken together.
Regardless of who is defending the claim, the other party has the right to participate in the proceedings and retain their own counsel at their own expense. Both parties are obligated to keep each other informed about the defense's status and cooperate in good faith. The franchisee cannot settle or compromise any claim without the prior written consent of Cinnabon, especially if it does not include a written release of liability for Cinnabon or if it adversely affects Cinnabon.
This clause ensures that Cinnabon maintains control over claims that could impact its brand, intellectual property, or reputation, even when the franchisee initially assumes the defense. Prospective franchisees should carefully consider these conditions and the potential financial implications of covering Cinnabon's legal fees under certain circumstances.