Who bears the expense of defending a claim against an Indemnified Party under the Cream franchise agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
, income, property, or other taxes, whether levied upon you or your Shop, due to the business you conduct (except for our income taxes). You are responsible for paying these taxes and must reimburse us for any such taxes that we must pay to any state taxing authority on account of your operation or payments that you make to us.
D. INDEMNIFICATION.
You agree to indemnify, defend, and hold harmless us, our affiliates, and each of our and their respective affiliates, owners, directors, managers, 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 directly or indirectly arising out of: (i) the development and operation of your Shop; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your employment practices, instituted by your employees or by others; and/or (v) the actions or omissions of you, your owners, or your and their respective representatives, unless (and then only to the extent that) the claims, obligations, or damages are determined to be caused solely by the Indemnified Party's intentional misconduct in a final, unappealable ruling issued by a court with competent jurisdiction or arbitrator. For purposes of this indemnification, "claims" include all obligations, damages (actual, consequential, or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it, including reasonable accountants', arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation or alternative dispute resolution, regardless of whether litigation or alternative dispute resolution is commenced.
Each Indemnified Party may defend any claim against it at your expense and agree to settlements or take any other remedial, corrective, or other actions. This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination. An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you under this subparagraph. You agree that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may recover from you under this Section 16.D. Any Indemnified Party may demand that you advance funds to such Indemnified Party to pay for any claims that are indemnifiable under this Section 16.D, and you will advance such funds promptly upon demand;
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the franchisee is responsible for covering the costs incurred by the Indemnified Parties when defending against claims. The Indemnified Parties include Cream, its affiliates, and their respective owners, directors, managers, officers, employees, agents, successors, and assignees. This means that if a claim arises from the franchisee's shop development, operation, business conduct, breach of the agreement, employment practices, or actions/omissions, the franchisee must cover the costs of defending against such claims.
The term "claims" is defined broadly to include all obligations, damages (actual, consequential, or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it. These costs specifically include reasonable accountants', arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation or alternative dispute resolution, regardless of whether litigation or alternative dispute resolution is commenced.
Cream has the right to defend any claim against it at the franchisee's expense and can agree to settlements or take other remedial actions. The franchisee's obligation to cover these costs continues even after the franchise agreement expires or terminates. Cream is not required to seek recovery from any insurer or mitigate its losses before seeking full recovery from the franchisee. Cream can also demand that the franchisee advance funds to cover indemnifiable claims, which the franchisee must promptly provide. However, if a court or arbitrator ultimately determines that a claim is not indemnifiable, Cream must reimburse the franchisee for the portion of funds attributable to the non-indemnifiable claims.