Can a Desi District franchisee settle an Action without the Indemnitee's consent?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall indemnify and defend (with counsel reasonably acceptable to Desi District Franchise Group) Desi District Franchise Group, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against Desi District Franchise Group and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, a franchisee is not allowed to settle an Action without obtaining consent from the Indemnitee. This requirement is part of the indemnity agreement outlined in Article 16.1.
This stipulation means that if a claim or lawsuit arises related to the franchisee's operation of the Desi District business, and Desi District or its related entities are named or affected, the franchisee cannot independently decide to settle the matter. They must first get approval from Desi District (the Indemnitee). This protects Desi District's interests and ensures that any settlement terms are acceptable to them, preventing potential negative impacts on the brand or system standards.
The franchisee's obligation to indemnify Desi District does not extend to Actions arising from the Indemnitee's intentional misconduct or negligence. However, the franchisee's inability to settle without consent applies to other situations where the franchisee is obligated to provide indemnity. This clause ensures Desi District maintains control over legal matters that could affect the brand, even if the franchisee is primarily responsible for the issue.
This type of clause is relatively common in franchise agreements, as franchisors typically want to maintain control over legal settlements that could set precedents or impact the brand's reputation. Prospective franchisees should understand that they will need to work closely with Desi District in managing and resolving any legal claims related to their business operations.