Does the Cream franchise agreement require the Indemnified Party to mitigate its losses before seeking indemnification from the franchisee?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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; provided, however, that if (and only to the limited extent that) any such claim is ultimately determined not to be indemnifiable under this Section 16.D in a final, unappealable ruling issued by a court with competent jurisdiction or arbitrator, such Indemnified Party must reimburse any portion of such funds that are attributable to such non-indemnifiable claims.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, the Cream franchise agreement does not require the Indemnified Party to mitigate its losses before seeking indemnification from the franchisee. The Indemnified Party includes Cream, its affiliates, and their respective owners, directors, managers, officers, employees, agents, successors, and assignees.
Specifically, the FDD states that an Indemnified Party does not need to seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, to maintain and fully recover a claim against the franchisee. Furthermore, the agreement specifies that a failure to pursue recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party can recover from the franchisee.
This means that as a Cream franchisee, you could be responsible for the full amount of claims, obligations, and damages, even if Cream could have reduced those losses through other means. Cream can also demand that you advance funds to cover any claims that are indemnifiable, and you must provide these funds promptly. If a court determines that a claim is not indemnifiable, Cream is obligated to reimburse the portion of funds attributable to the non-indemnifiable claims.