Does the Engel & Volkers guarantee apply to claims related to fraudulent transfers from the franchisee?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee expressly agrees that its obligation to indemnify and hold harmless Franchisor and the other indemnitees under Section 17 of this Agreement extends to and embraces liabilities arising from or relating to, directly or indirectly, any statements, representations or warranties that Franchisee may give to or receive from any proposed assignee and/or any claim that Franchisee (and, if Franchisee is a business entity, its owners, management or staff members) or its assignee engaged in fraud, deceit, violation of franchise laws or other illegality in connection with the negotiation or consummation of the assignment. As with all other indemnification obligations set forth in this Agreement, this specific indemnification obligation will survive the termination or expiration of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, franchisees are obligated to indemnify Engel & Volkers against various claims, losses, and liabilities. This obligation extends to liabilities arising from any statements, representations, or warranties the franchisee makes during the assignment of the franchise agreement. Specifically, the indemnity covers claims that the franchisee engaged in fraud, deceit, or violation of franchise laws in connection with negotiating or completing the assignment. This indemnification obligation survives the termination or expiration of the Franchise Agreement. Therefore, the Engel & Volkers guarantee does not apply to claims related to fraudulent transfers from the franchisee. Instead, the franchisee is responsible for covering these claims.
This means that if a franchisee attempts to transfer their franchise and, in the process, makes fraudulent statements or engages in deceitful practices that lead to claims against Engel & Volkers, the franchisee is responsible for covering the resulting losses, legal fees, and other associated costs. This responsibility is irrespective of whether the franchise agreement is still active or has been terminated.
This clause protects Engel & Volkers from liabilities caused by the franchisee's actions during franchise assignments. It also encourages franchisees to be transparent and honest in their dealings with potential assignees. Franchisees should ensure they fully understand their obligations and potential liabilities when considering a franchise transfer.