What is the required standard for counsel used to defend Endless Summer Sweets in legal actions?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Our out-of-pocket | When billed | We may cure your non-compliance on | |
| costs and internal | your behalf (for example, if you do not | ||
| cost allocation, plus | have required insurance, we may purchase | ||
| 10% | insurance for you), and you will owe our | ||
| costs plus a 10% administrative fee. | |||
| $10,000 plus any | Payable only if you sell your business. | ||
| broker fees and other | |||
| out-of-pocket costs | |||
| we incur | |||
| An amount equal to | |||
| royalty fees and | |||
| marketing fund | |||
| contributions for the | |||
| lesser of (i) 2 years | |||
| or (ii) the remaining | |||
| weeks of the | |||
| franchise term. | |||
| Our costs and losses | You must indemnify and defend (with | ||
| from any legal | counsel reasonably acceptable to us) us | ||
| action related to the | and our affiliates against all losses in any | ||
| operation of your | action by or against us related to, or | ||
| franchise | alleged to arise out of, the operation of | ||
| your franchise (unless caused by our | |||
| misconduct or negligence). |
Source: Item 7 — Estimated Initial Investment (FDD pages 10–14)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, franchisees are obligated to indemnify and defend Endless Summer Sweets and its affiliates against any losses from legal actions related to the operation of their franchise. This obligation includes covering the costs and losses incurred by Endless Summer Sweets from such legal actions. However, this requirement does not apply if the legal action is a result of Endless Summer Sweets' misconduct or negligence.
Specifically, the legal counsel used by the franchisee to defend Endless Summer Sweets must be "reasonably acceptable" to Endless Summer Sweets. This means that while the franchisee has the right to choose their own counsel, Endless Summer Sweets retains the right to approve or reject the chosen counsel based on their assessment of the counsel's qualifications and suitability.
This requirement is fairly standard in franchising, as franchisors want to ensure that any legal representation acting on their behalf meets a certain standard of competence and experience. It protects the brand's reputation and legal interests by ensuring that the defense is handled appropriately. For a prospective franchisee, this means they should be prepared to potentially change their legal counsel if Endless Summer Sweets does not find their initial choice acceptable. It would be prudent to discuss with Endless Summer Sweets what criteria they use to determine whether counsel is "reasonably acceptable" to avoid potential conflicts or delays in the event of a legal action.