Is the Engel & Volkers franchisee responsible for defects in the franchised office, even if undiscoverable?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
te a defense to Franchisor's enforcement of the covenants not to compete in this Agreement. Franchisee agrees to pay all costs and expenses, including reasonable attorneys' and experts' fees that Franchisor incurs in connection with the enforcement of the covenants not to compete set forth in this Agreement.
- 16.5 Execution of Separate Agreement. Each shareholder, partner, member, officer, director, brokerage manager and office manager of Franchisee shall execute Franchisor's form of Confidentiality Agreement and Covenant Not to Compete attached as Appendix 3.
17. Liability/Indemnity
17.1 Indemnity:
Franchisee will, at its sole cost, at all times defend, reimburse and hold harmless Franchisor and its affiliates, subsidiaries, successors, assigns and designees; and, the officers, directors, managers, employees, contractors, agents, attorneys, shareholders, owners, members, designees and representatives of all of the foregoing (Franchisor and all others referenced above being the "Indemnified Parties"), and indemnify and hold harmless Franchisor and the other Indemnified Parties to the fullest extent permitted by law, against all claims, losses, liabilities and costs (as denominated in the following paragraph) incurred in connection with any judicial, administrative or arbitration action or proceeding (including bankruptcy, insolvency, debtor/creditor or similar proceedings), suit, claim, demand, investigation, or formal or informal inquiry (regardless of whether any of the foregoing is reduced to judgment) or any settlement of the foregoing, which actually or allegedly, directly or indirectly, arises out of, is based upon, is a result of or is related in any way to any element of Franchisee's entry into this Agreement; actions or omissions committed by Franchisee or its affiliates, employees, contractors, or Sales Advisors in connection with the operation of the ENGEL & VÖLKERS Residential Real Estate Brokerage hereunder; the establishment, construction, ownership, opening and operation of the office of Franchisee's franchised Business hereunder, including any other business operating within or in relation to the office (which other business, if any, shall be subsumed within this paragraph's references to the office) and further including (without limitation) any personal, bodily or mental injury, death, property damage or loss, suffered by any customer, visitor, manager, operator, supplier, employee, contractor, or guest of the franchised ENGEL & VÖLKERS office; crimes committed on or near any of the premises or facilities of Franchisee's franchised Business or vehicles used by Franchisee's franchised Business; all acts, errors, neglects or omissions engaged in by Franchisee, its contractors or subcontractors, as well as any third party, arising out of or related to the design, construction, conversion, build-out, outfitting, remodeling, renovation or upgrading of its franchised ENGEL & VÖLKERS office, whether or not any of the foregoing was approved by Franchisor; defects in any ENGEL & VÖLKERS franchised office that Franchisee constructs and/or operates, whether or not discoverable by Franchisee or by Franchisor; all acts, errors, neglects or omissions of Franchisee or the franchised ENGEL & VÖLKERS Residential Real Estate Brokerage and/or the owners, officers, directors, management, employees, agents, servants, contractors, partners, proprietors, affiliates or representatives of Franchisee and/or the franchised Business and/or the location thereof (or any third party acting on Franchisee's behalf or at Franchisee's direction), whether in connection with the franchised business, the office or otherwise, including (without limitation) any property damage, injury or death suffered or caused by any vehicle serving the franchised Business; any claim, however and wherever asserted, that Franchisor or its respective affiliates are the employer, joint employer or coemployer of Franchisee and/or Franchisee's employees or contractors; claims that Franchisee, its owners, employees, contractors, brokers or Franchisee's Sales Advisors are Franchisor's employees, agents or part of a common enterprise with Franchisor, including claims regarding violation or labor or employment law regulations; third party claims against Franchisor arising from or related to Franchisee's breach of the terms, restrictions and requirements of this Agreement (including, without limitation, Franchisee's unauthorized use of the Trademarks, violation of any applicable laws, codes, rules or regulations or failure to comply with Information Privacy Laws); Franchisee's violation of Information Privacy Laws; all liabilities arising from Franchisee's offer, sale and/or delivery of programs, services and/or products as contemplated by this Agreement; Franchisee's offer, sale and/or delivery of securities, equity interests or other ownership interests in Franchisee or the franchised ENGEL & VÖLKERS office or business of Franchisee;
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, the franchisee is responsible for defects in the franchised office, even if these defects are undiscoverable. Specifically, the franchisee agrees to indemnify Engel & Volkers against all claims, losses, liabilities, and costs arising from defects in any Engel & Volkers franchised office that the franchisee constructs and/or operates. This responsibility applies regardless of whether the defects were discoverable by the franchisee or by Engel & Volkers.
This requirement means that Engel & Volkers franchisees bear significant financial risk related to the physical premises of their business. Even if a defect is hidden or latent, the franchisee is still liable for any resulting claims, losses, or costs. This could include structural issues, environmental hazards, or other problems that were not apparent during construction or operation.
This clause is a significant point for potential franchisees to consider. It is essential to conduct thorough due diligence on the property before opening an Engel & Volkers franchise. Franchisees may want to obtain their own independent inspections and assessments to identify potential defects and understand the associated risks. Additionally, franchisees should ensure they have adequate insurance coverage to protect against potential liabilities arising from undiscoverable defects.
It is also important to note that the franchisee is not responsible for liability associated with Engel & Volkers' gross negligence, willful misconduct, or criminal acts, unless joint liability is involved. In such cases, the indemnification extends to any finding of comparative or contributory negligence attributable to the franchisee.