Does the Cinnaholic franchisee's indemnification obligation continue after the termination of the Franchise Agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
18.1. Indemnification. Franchisee agrees to indemnify, defend and hold harmless Franchisor and its affiliates, shareholders, directors, officers, employees, agents, successors and assignees (the "Indemnified Parties") against and to reimburse any one or more of the Indemnified Parties for all claims, obligations and damages described in this Section, any taxes described in Section 18.3 below and any claims and liabilities directly or indirectly arising out of the Bakery's operation or Franchisee's breach of this Agreement, except to the extent they arise as a result of Franchisor's own gross negligence or willful misconduct. For purposes of this indemnification, "claims" includes all obligations, damages (actual, consequential or otherwise) and costs reasonably incurred in the defense of any claim against any of the Indemnified Parties, including reasonable accountants', arbitrators', attorneys' and expert witness fees, costs of investigations and proof of facts, court costs, other expenses of litigation, arbitration or alternative dispute resolution and travel and living expenses. Franchisor has the exclusive right to defend any such claim. This indemnity will continue in effect after the expiration or termination of this Agreement. Under no circumstances will Franchisor or any other Indemnified Party be required to seek recovery from any insurer or other third party, or otherwise to mitigate its or their losses and expenses, in order to maintain and recover fully a claim against Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the franchisee's obligation to indemnify Cinnaholic continues even after the Franchise Agreement expires or is terminated. Specifically, the franchisee must indemnify, defend, and hold harmless Cinnaholic and its affiliates, shareholders, directors, officers, employees, agents, successors, and assignees. This means the franchisee remains responsible for covering claims, obligations, and damages related to the bakery's operation or any breach of the Franchise Agreement, even after the agreement ends. This indemnification extends to taxes and any claims or liabilities that arise directly or indirectly from the bakery's operations or the franchisee's violation of the agreement. However, the franchisee is not responsible for claims arising from Cinnaholic's own gross negligence or willful misconduct.
The term "claims" is broadly defined to include all obligations, damages (both actual and consequential), and costs reasonably incurred in defending against any claim. This includes accountants', arbitrators', attorneys', and expert witness fees, costs of investigations, proof of facts, court costs, other litigation expenses, and travel and living expenses. Cinnaholic retains the exclusive right to defend any such claim, and neither Cinnaholic nor any other indemnified party is required to seek recovery from any insurer or third party to maintain a claim against the franchisee.
This extended indemnification obligation is a significant consideration for prospective Cinnaholic franchisees. It means that even after ceasing operations or the formal end of the franchise relationship, the franchisee could still be liable for past actions or issues that arise related to their operation of the Cinnaholic bakery. Franchisees should carefully consider this long-term responsibility and ensure they maintain adequate insurance coverage and operate their business in a manner that minimizes potential liabilities. The franchisee should seek legal counsel to fully understand the scope and implications of this indemnification clause.