Under what condition must an Indemnified Party reimburse funds advanced by a Cream franchisee for indemnifiable claims?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Cream's 2025 Franchise Disclosure Document, an Indemnified Party may demand that a franchisee advance funds to cover claims that are believed to be indemnifiable. This means Cream can require you to pay for the defense of claims against them upfront.
However, the Indemnified Party is obligated to reimburse the Cream franchisee if a court or arbitrator issues a final, unappealable ruling determining that the claim was not actually indemnifiable under Section 16.D of the franchise agreement. The reimbursement is limited to the portion of the advanced funds that are attributable to the non-indemnifiable claims.
This condition protects the Cream franchisee from ultimately bearing the costs of claims for which they are not responsible under the franchise agreement. It also ensures that Cream has access to funds to defend itself against claims, while providing a mechanism for recoupment if the franchisee was not actually liable. This is a fairly standard clause in franchise agreements, intended to balance the interests of both parties in managing potential liabilities.