Does the Exit franchisee have to indemnify the subfranchisor for costs incurred in proceedings for injunctive relief?

According to Exit's 2025 Franchise Disclosure Document, the franchisee is required to indemnify the subfranchisor for costs incurred in proceedings for injunctive relief under specific circumstances. The franchisee must indemnify the subfranchisor for all costs incurred in proceedings for injunctive relief related to violations of the Exit System. These violations include issues related to the proprietary marks, franchisee obligations upon termination or expiration of the agreement, assignment of the agreement, covenants not to compete, confidentiality, or any act or omission by the franchisee, its employees, or agents that violates laws or impairs the goodwill associated with the Exit System.

This indemnification extends to all costs the subfranchisor incurs in such proceedings. This includes reasonable attorneys' fees, expert witness fees, costs of investigation, court costs, accounting fees, travel and living expenses, and all other related costs. The FDD specifies that these measures are necessary to protect the legitimate business interests of Exit, the subfranchisor, and other franchisees, particularly concerning the prevention of damage to goodwill, unauthorized dissemination of confidential information, protection of trade secrets, and the integrity of the Exit System.

This requirement means that if an Exit franchisee engages in activities that violate the franchise agreement and the subfranchisor seeks injunctive relief, the franchisee will be responsible for covering all associated costs. This could potentially create a significant financial burden for the franchisee, especially if the legal proceedings are extensive or complex. Prospective franchisees should carefully consider this indemnification clause and its potential financial implications before entering into a franchise agreement with Exit. It would be prudent to consult with a legal professional to fully understand the scope of this obligation and to assess the risks involved.