Under what circumstances is a Desi District franchisee required to indemnify the franchisor?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Indemnity | Our costs and losses from any legal action related to the operation of your franchise | On demand | You must indemnify and defend (with counsel reasonably acceptable to us) us and our affiliates against all losses in any action by or against us related to, or alleged to arise out of, the operation of your franchise (unless caused by our misconduct or negligence). |
Source: Item 6 — OTHER FEES (FDD pages 16–20)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees are required to indemnify the franchisor under specific circumstances related to the operation of their franchise. The franchisee must cover Desi District's costs and losses from any legal action related to the operation of the franchise. This includes defending Desi District and its affiliates against all losses in any action by or against them. The legal counsel used for the defense must be reasonably acceptable to Desi District.
This obligation to indemnify Desi District arises from legal actions related to, or alleged to arise out of, the operation of the franchisee's business. However, there is an exception: the franchisee is not required to indemnify Desi District if the legal action is caused by Desi District's own misconduct or negligence.
In practical terms, this means that if a customer sues Desi District because of something that happened at a franchisee's location (and it wasn't due to Desi District's direct actions), the franchisee would be responsible for covering Desi District's legal costs and any resulting losses. This is a fairly standard clause in franchise agreements, designed to protect the franchisor from liabilities arising from the franchisee's operations. Prospective franchisees should carefully consider this obligation and ensure they have adequate insurance coverage to protect themselves against potential claims.