In a legal or arbitration proceeding involving Cream, who is responsible for covering damages, costs, and expenses?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
C. COSTS AND ATTORNEYS' FEES.
The prevailing party in any judicial or arbitration proceeding shall be entitled to recover from the other party all damages, costs, and expenses, including arbitration and court costs and reasonable attorneys' fees, incurred by the prevailing party in connection with such proceeding.
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. Any Indemnified Party may demand that you advance funds to such Indemnified Party to pay for any claims that are indemnifiable under this Section, 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 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 Cream's 2025 Franchise Disclosure Document, the responsibility for covering damages, costs, and expenses in legal or arbitration proceedings depends on who prevails in the action. The FDD states that the prevailing party is entitled to recover all damages, costs, and expenses, including arbitration and court costs, as well as reasonable attorneys' fees, from the other party. This applies to both judicial and arbitration proceedings. Therefore, if Cream wins a legal dispute with the franchisee, the franchisee may be responsible for Cream's legal costs, and vice versa.
Additionally, the franchisee agrees to indemnify Cream, its affiliates, and their respective personnel against claims, obligations, and damages arising from the franchisee's shop development, operation, business conduct, breach of the agreement, employment practices, or actions/omissions, unless these are caused solely by Cream's intentional misconduct. This indemnification covers all obligations, damages, and costs, including accountants', arbitrators', attorneys', and expert witness fees, costs of investigation, court costs, and travel expenses. Cream can defend any claim at the franchisee's expense and settle or take corrective actions.
Furthermore, Cream can demand that the franchisee advance funds to cover indemnifiable claims, which the franchisee must promptly provide. However, if a claim is ultimately determined to be non-indemnifiable, Cream must reimburse the franchisee for the portion of funds attributable to those non-indemnifiable claims. This means that franchisees could face significant financial burdens related to legal disputes, especially if they are required to advance funds for claims that may later be deemed not indemnifiable. Franchisees should carefully consider these financial responsibilities and seek legal counsel to understand the full scope of their obligations under the franchise agreement.