Are there any circumstances under which a Del Taco franchisee is NOT required to indemnify Del Taco for claims arising from the franchisee's operation?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall, to the fullest extent permissible under applicable law, indemnify and hold Del Taco and its affiliates, and each of Del Taco's respective officers, directors, employees, and agents harmless against any and all claims, obligations, and damages arising directly or indirectly from, as a result of, or in connection with this Agreement, the Restaurant, Franchisee's operation of the Restaurant, Franchisee and its employees' actions and inaction, or Franchisee's breach of this Agreement, including those alleged to be caused by Del Taco's negligence, as well as the costs, including attorneys' fees, costs, and expenses (and interest on such fees, costs, and expenses), of defending against them, unless (and then only to the extent that) the claims, obligations, and damages are determined to be caused solely by Del Taco's gross negligence or willful misconduct according to a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a franchisee is generally required to indemnify Del Taco and its affiliates against claims, obligations, and damages arising from the franchise agreement, the restaurant's operation, the franchisee's actions or inactions, or the franchisee's breach of the agreement. This indemnification extends to costs, including attorney's fees, incurred in defending against such claims. This means that if someone sues Del Taco because of something the franchisee or their employees did (or didn't do), the franchisee would have to cover Del Taco's legal costs and any damages awarded.
However, the franchisee is not required to indemnify Del Taco if the claims, obligations, and damages are determined to be caused solely by Del Taco's gross negligence or willful misconduct. This determination must be made by a final, unappealable ruling from a court or arbitrator with competent jurisdiction. In other words, if Del Taco itself is grossly negligent or intentionally does something wrong that leads to the claim, the franchisee is not responsible for covering Del Taco's losses.
This type of indemnification clause is common in franchise agreements. It aims to protect the franchisor from liabilities arising from the franchisee's day-to-day operations. However, the exception for the franchisor's own gross negligence or willful misconduct is an important protection for the franchisee. It ensures that the franchisee is not held responsible for Del Taco's own serious mistakes or intentional wrongdoing. A prospective franchisee should carefully consider the scope of this indemnification clause and the potential financial implications.