What is the definition of 'claims' for indemnification purposes related to a Cream franchise?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, the term "claims" for indemnification purposes in the Cream franchise agreement is broadly defined. It encompasses all obligations, damages (whether actual, consequential, or otherwise), and costs that an Indemnified Party reasonably incurs while defending against any claim. These costs include reasonable fees for accountants, arbitrators, attorneys, and expert witnesses.
Furthermore, the definition extends to costs associated with investigation and proof of facts, court costs, travel and living expenses, and other expenses related to litigation or alternative dispute resolution. This applies regardless of whether litigation or alternative dispute resolution is formally commenced. This broad definition means that a Cream franchisee could be responsible for a wide range of expenses incurred by the franchisor or its affiliates in defending against claims arising from the franchisee's business operations, breach of contract, or actions/omissions.
This indemnification clause places a significant financial responsibility on the Cream franchisee. It is important to note that the franchisee is responsible for these costs unless the claims, obligations, or damages are determined to be caused solely by the Indemnified Party's intentional misconduct in a final, unappealable ruling by a competent court or arbitrator. This high bar for exception means that franchisees bear most of the risk associated with legal claims related to their business.