What costs is the Exit franchisee required to indemnify the subfranchisor for in injunctive relief proceedings?

According to Exit's 2025 Franchise Disclosure Document, the franchisee must indemnify the subfranchisor for all costs incurred in injunctive relief proceedings. This includes, but is not limited to, reasonable attorneys' fees, expert witness fees, costs of investigation, court costs, accounting fees, travel and living expenses, and all other related costs incurred by the subfranchisor. This requirement applies when the subfranchisor seeks injunctions to enforce provisions related to Exit's proprietary marks and system, franchisee obligations upon termination or expiration, assignment of the agreement, covenants not to compete, confidentiality, or any act or omission by the franchisee that violates laws or impairs the goodwill of the Exit system.

This means that if Exit's subfranchisor pursues legal action against a franchisee for violating the franchise agreement and seeks an injunction, the franchisee is responsible for covering all associated costs incurred by the subfranchisor. These costs can potentially be substantial, encompassing a wide range of expenses from legal representation to expert analysis and travel. The franchisee's obligation to cover these costs is triggered by the subfranchisor's decision to pursue injunctive relief, regardless of the outcome of the proceedings.

This indemnification clause highlights a significant financial risk for Exit franchisees. It is common in franchising for franchisees to bear responsibility for legal costs arising from their own actions, but the breadth of costs covered under this clause is notable. Prospective franchisees should carefully consider this potential financial burden and factor it into their assessment of the franchise opportunity. They may want to seek legal counsel to fully understand the implications of this indemnification clause and explore options for mitigating this risk, such as insurance coverage or negotiating modifications to the agreement.