What is the exception to the indemnification requirement for a Corner Bakery Cafe franchisee?
Corner_Bakery_Cafe Franchise · 2025 FDDAnswer from 2025 FDD Document
itigation expenses, and travel and living expenses. |
| Type of Fee(1) | Amount | Due Date(2) | Remarks |
|---|---|---|---|
| Crisis Management | Our costs and expenses | Upon demand | You must reimburse us for any costs and expenses that we incur in responding to any crisis including food borne illness, fire or other casualty, robbery, violence or other situations related to the Franchised Cafe. |
| Indemnification | The actual losses and expenses incurred by us and our affiliates | As incurred | You must defend, indemnify and hold us and our affiliates harmless in all actions arising out of or resulting from the development or operation of your Franchised Cafe, excluding our gross negligence or willful misconduct. |
| Interest and Late Charge | Interest: 18% per annum or the maximum rate permitted by law, whichever is less; Late Charge: $500 for each delinquent payment | When any payment or report is not actually received by us on or before the due date | Interest is due on the amount owed from the date due until paid. We may also require you to provide a letter of credit from a national bank, on terms set forth in the Manual, equal to 150% of all fees (including Royalty Fees, marketing contributions and fees, interest and other payments due to us) anticipated to be due annually under all |
Source: Item 6 — OTHER FEES (FDD pages 11–16)
What This Means (2025 FDD)
According to the 2025 FDD, Corner Bakery Cafe franchisees must defend, indemnify, and hold harmless Corner Bakery Cafe and its affiliates in actions arising from the development or operation of their franchised cafe. However, this indemnification requirement does not apply if the action arises from Corner Bakery Cafe's gross negligence or willful misconduct. This means that while franchisees are generally responsible for covering the legal costs and damages resulting from their cafe's operations, they are not responsible if Corner Bakery Cafe itself is grossly negligent or engages in willful misconduct.
In practical terms, this means a Corner Bakery Cafe franchisee could be responsible for legal claims arising from things like a customer injury due to a slip-and-fall, or a foodborne illness outbreak caused by the franchisee's failure to follow proper food safety procedures. The franchisee would have to cover Corner Bakery Cafe's legal expenses and any damages awarded to the claimant. However, if the incident was caused by Corner Bakery Cafe's own actions, such as providing faulty equipment or mandating unsafe practices, the franchisee would not be required to indemnify Corner Bakery Cafe.
This type of indemnification clause is common in franchise agreements, as it protects the franchisor from liabilities arising from the franchisee's day-to-day operations. However, the exception for gross negligence or willful misconduct ensures that Corner Bakery Cafe cannot escape responsibility for its own actions. Prospective franchisees should carefully review the indemnification clause and understand the types of situations in which they would be required to defend and indemnify Corner Bakery Cafe.