What is the required action regarding legal counsel when a Desi District franchisee is defending an Indemnitee?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.1 Indemnity. 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.
- 16.2 Assumption. An Indemnitee may elect to assume the defense of any Action subject to this indemnification, and control all aspects of defending the Action, including negotiations and settlement, at Franchisee's expense. Such an undertaking shall not diminish Franchisee's obligation to indemnify the Indemnitees.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee is required to defend an Indemnitee, they must do so with legal counsel that is reasonably acceptable to Desi District Franchise Group. An Indemnitee includes Desi District Franchise Group, its parent entities, subsidiaries, affiliates, and their respective owners, directors, officers, employees, agents, successors, and assignees. This requirement is part of the franchisee's broader obligation to indemnify the Indemnitees against losses related to the operation of the Desi District business.
However, the franchisee is not obligated to indemnify an Indemnitee for actions arising from the Indemnitee's intentional misconduct or negligence. If an Indemnitee delays or fails to notify the franchisee of an action, this does not relieve the franchisee of their indemnity obligation unless the delay materially prejudices the franchisee. The franchisee cannot settle any action without the Indemnitee's consent. This indemnification obligation remains in effect even after the franchise agreement ends.
An Indemnitee has the option to assume the defense of any action subject to indemnification, controlling all aspects of the defense, including negotiations and settlement, at the franchisee's expense. This assumption of defense does not reduce the franchisee's obligation to indemnify the Indemnitees. This clause ensures that Desi District maintains control over legal defenses that could impact the brand or its related entities, while the franchisee bears the financial responsibility unless the issue stems from the Indemnitee's actions.