If Dermani Medspa exercises its Step-In Rights, is the franchisee required to indemnify Dermani Medspa and its representatives for actions during the temporary operation?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
e may deem you incapable of operating the Franchised Business if, without limitation, you are absent or incapacitated by reason of illness or death; you have failed to pay when due or have failed to remove any and all liens or encumbrances of every kind placed upon or against your business; or we determine that operational problems require that we operate your Franchised Business for a period of time that we determine,
- in our sole discretion, to be necessary to maintain the operation of the Franchised Business as a going concern.
- 18.18.2.We shall keep in a separate account all monies generated by the operation of your Franchised Business, less the expenses of the Franchised Business, including reasonable compensation and expenses for ou
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
According to the 2025 Dermani Medspa FDD, if Dermani Medspa exercises its Step-In Rights to temporarily operate a franchised business, the franchisee agrees to hold harmless Dermani Medspa and its representatives for all actions occurring during the course of such temporary operation. The franchisee also agrees to pay all of Dermani Medspa's reasonable attorneys' fees and costs incurred as a consequence of their exercise of the Step-In Rights. This means that the franchisee is responsible for covering any legal or financial liabilities that Dermani Medspa or its representatives might incur while they are temporarily running the business.
The Step-In Rights are triggered if Dermani Medspa determines, in its sole judgment, that the operation of the franchised business is in jeopardy or if a default occurs. This provision is designed to prevent an interruption of the franchised business that could harm the Dermani Medspa system. Circumstances that could lead Dermani Medspa to deem the franchisee incapable of operating the business include the franchisee's absence or incapacitation due to illness or death, failure to pay debts when due, or the presence of liens or encumbrances on the business.
This clause highlights a significant financial risk for the franchisee. Should Dermani Medspa need to step in, the franchisee not only loses control of their business temporarily but also assumes responsibility for any liabilities arising from Dermani Medspa's operation during that period. The FDD specifies that Dermani Medspa will keep all monies generated by the operation of the franchised business in a separate account, and expenses of the business, including compensation for Dermani Medspa's representatives (capped at $1,000 per person per day), will be charged to that account. However, the franchisee remains liable for indemnification, potentially facing substantial costs if issues arise during Dermani Medspa's temporary management.