Under what circumstances related to employee allegations would a Cinnabon franchisee be required to indemnify the Indemnified Parties?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
13. INDEMNIFICATION; INSURANCE
13.1 Indemnification.
- A.
Indemnification Obligation.
You must defend, indemnify, and hold harmless us and our affiliates, our and their permitted successors and assigns, and each of our and their respective direct and indirect owners, directors, officers, managers, employees, agents, attorneys, and representatives (collectively, the "Indemnified Parties") from and against all Losses (defined below), which any of the Indemnified Parties may suffer, sustain, or incur as a result of a claim asserted or inquiry made formally or informally, or a legal action, investigation, or other proceeding brought, by a third party and directly or indirectly arising out of or relating to: (i) the operation of the Franchised Business; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any Law; or (v) any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees. "Losses" include all obligations, liabilities, damages (actual, consequential, or otherwise), and reasonable defense costs that any Indemnified Party incurs.
Defense costs include arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced.
- B.
Indemnification Procedure.
We will promptly notify you of any claim that may give rise to a claim of indemnity hereunder, provided, however, that the failure to provide such notice shall not release you from your indemnification obligations under this Section 13.1, except to the extent you are actually and materially prejudiced by such failure.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, a franchisee is obligated to defend, indemnify, and hold harmless the Indemnified Parties from any losses they incur due to third-party claims or inquiries that directly or indirectly arise from allegations related to the franchisee's employees. The Indemnified Parties include Cinnabon and its affiliates, their successors and assigns, and their respective owners, directors, officers, managers, employees, agents, attorneys, and representatives.
This indemnification obligation covers a broad range of potential claims. Specifically, it includes claims arising from the operation of the franchised business, the franchisee's conduct under the agreement, any breach of the agreement, noncompliance with laws, or any allegation that Cinnabon is a joint employer or otherwise responsible for the franchisee's actions or omissions related to their employees. The term "Losses" is defined to include all obligations, liabilities, damages, and reasonable defense costs incurred by the Indemnified Parties, including legal fees and costs of investigation.
However, it is important to note that a separate section of the FDD modifies the indemnification requirements. The franchisee has no obligation to indemnify Cinnabon or any other indemnified party for losses or liabilities to the extent that they are caused by the indemnified party's negligence, willful misconduct, strict liability, or fraud. This modification provides some protection to the franchisee against being held responsible for Cinnabon's own actions.
In practical terms, this means that if a Cinnabon franchisee faces a lawsuit or claim related to their employees' actions, and it is not due to Cinnabon's negligence, willful misconduct, strict liability, or fraud, the franchisee will be responsible for defending and covering the costs incurred by Cinnabon and related parties. This could include situations such as employee lawsuits, wage and hour disputes, or allegations of discrimination or harassment. Franchisees should ensure they have adequate insurance coverage and legal counsel to address these potential liabilities.