What is the exception to the Cream franchisee's indemnification obligation if the Indemnified Party is negligent?
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 your Development Rights, the business you conduct under this Agreement, your breach of this Agreement, and/or the actions or omissions of you, your owners, or your and their respective representatives, including those alleged to be caused by the Indemnified Party's negligence, 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,
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, franchisees are generally required to indemnify Cream and its affiliates against claims and damages arising from the franchisee's business operations, breaches of the franchise agreement, or the actions of the franchisee and their representatives. This indemnification extends to claims caused by Cream's negligence. However, there is an exception.
The exception to this indemnification obligation arises if the claims, obligations, or damages are determined to be caused solely by the Indemnified Party's intentional misconduct. This determination must be made in a final, unappealable ruling by a court with competent jurisdiction or an arbitrator.
In practical terms, this means that while a Cream franchisee is responsible for covering losses and legal costs even if Cream is partially at fault due to negligence, the franchisee is not responsible if Cream's intentional misconduct is the sole cause of the damages. This provides a limited layer of protection for the franchisee against egregious actions by Cream. It is important to note the high bar of 'intentional misconduct' and the requirement for a final, unappealable ruling, which suggests that franchisees would likely bear the initial costs of defense until such a ruling is obtained.