Under what circumstances is a Cinnaholic franchisee NOT required to indemnify the Franchisor?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
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 the 2025 Cinnaholic Franchise Disclosure Document, a franchisee is generally required to indemnify, defend, and hold harmless Cinnaholic and its related parties from claims, obligations, damages, and taxes arising from the bakery's operation or the franchisee's breach of the Franchise Agreement. This indemnification covers costs incurred in defending claims, including legal fees and expenses.
However, the franchisee is not required to indemnify Cinnaholic to the extent that the claims arise as a result of Cinnaholic's own gross negligence or willful misconduct. This means that if Cinnaholic's actions directly lead to the claims or damages, the franchisee is not responsible for covering Cinnaholic's losses.
This clause is a fairly standard provision in franchise agreements, allocating risk between the franchisor and franchisee. It is important for a prospective Cinnaholic franchisee to understand the scope of this indemnification and to ensure they have adequate insurance coverage to protect themselves against potential claims. Franchisees should consult with a legal professional to fully understand their obligations and rights under the indemnification clause.