In the context of selling securities, to what extent must an Embassy Suites franchisee indemnify the Indemnified Parties, as defined in Subsection 14.1 of the Franchise Agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.2 You do not have to indemnify an Indemnified Party to the extent damages otherwise covered under this Section 14 are adjudged by a final, non-appealable judgment of a court of competent jurisdiction to have been solely the result of the gross negligence or willful misconduct of that Indemnified Party, and not any of the acts, errors, omissions, negligence or misconduct of you or anyone related to you or the Hotel.
You may not rely on this exception to your indemnity obligation if the claims were asserted against us or any other Indemnified Party on the basis of theories of imputed or secondary liability, such as vicarious liability, agency, or apparent agency, or our failure to compel you to comply with the provisions of this Agreement, including compliance with Standards, Laws or other requirements.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
Based on the 2025 Embassy Suites Franchise Disclosure Document, the franchisee's obligation to indemnify the Indemnified Parties, as defined, does not extend to damages resulting solely from the gross negligence or willful misconduct of the Indemnified Party. This protection is contingent upon a final, non-appealable judgment from a competent court. However, this exception does not apply if claims are based on imputed or secondary liability theories such as vicarious liability, agency, apparent agency, or the franchisor's failure to enforce compliance with the Franchise Agreement.
In practical terms, an Embassy Suites franchisee is generally responsible for covering losses, damages, or expenses incurred by the Indemnified Parties (which include Embassy Suites and its affiliates, as well as their officers, directors, employees, and agents) arising from various situations related to the hotel's operation. These situations include occurrences at the hotel resulting in personal injury, death, or property damage; infringement of intellectual property rights; breaches of contract or violations of laws and industry standards; business conducted at the hotel; failure to comply with specific obligations; and issues arising from fees or costs charged to guests.
However, the franchisee is not required to indemnify Embassy Suites if a court determines that the damages were solely due to Embassy Suites's own gross negligence or willful misconduct. This provides a limited layer of protection for the franchisee. It is important to note that the franchisee cannot claim this exception if the claims against Embassy Suites are based on the franchisee's actions or omissions, or on legal theories that hold Embassy Suites secondarily liable for the franchisee's conduct.
This indemnification clause is a standard risk-allocation tool in franchising. It aims to protect the franchisor from liabilities arising from the franchisee's operation of the business. Prospective Embassy Suites franchisees should carefully consider the scope of this indemnification obligation and consult with legal counsel to understand its potential impact.