What is the standard for determining if the Indemnified Party's intentional misconduct negates the Cream franchisee's indemnification obligation?
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.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, a Cream franchisee is typically required to indemnify Cream and its affiliates against claims and damages arising from the franchisee's business operations, breach of the franchise agreement, or the actions of the franchisee and their representatives. However, the franchisee's indemnification obligation is negated 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 issued by a court with competent jurisdiction or an arbitrator. This means that the franchisee's protection from indemnification hinges on a legal or arbitration decision that specifically and conclusively finds that Cream's intentional misconduct was the sole cause of the damages or claims.
This provision is important for prospective Cream franchisees because it clarifies the circumstances under which they would not be responsible for covering Cream's liabilities. The high standard of proof—a final, unappealable ruling—suggests that it may be difficult for a franchisee to avoid indemnification based on Cream's intentional misconduct. Franchisees should be aware of this requirement and understand the potential implications for their business and financial obligations.