Who is the Exit franchisee required to defend in addition to the subfranchisor?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as provided in Section 8.3, Franchisee shall assume sole and entire responsibility for fines, suits, proceedings, claims, or damages relating to its business whether asserted by a governmental authority or any other party, or any costs, expenses or liability by reason of any loss of life, or injuries and claimed injuries, sustained in connection with the operation of its real estate service, and shall defend, indemnify and hold EXIT and Subfranchisor harmless from any and all claims, liability or expenses, including attorneys' fees, which EXIT or Subfranchisor may incur as a result of the conduct of Franchisee's business.
9.7. Insurance
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchisee is required to defend and indemnify both the subfranchisor and Exit from claims, suits, proceedings, or damages related to the franchisee's business operations. This responsibility extends to any costs, expenses, or liabilities, including attorney's fees, that Exit or the subfranchisor may incur due to the franchisee's business conduct. This obligation is outlined in Section 9.6 of the franchise agreement, emphasizing the franchisee's role in assuming responsibility for their business operations.
This means that if a customer, vendor, or any other party brings a claim against Exit or the subfranchisor due to something that occurred within the franchisee's business, the franchisee is legally obligated to cover the costs of defending against that claim, including legal representation and any resulting settlements or damages. This indemnification clause is a standard practice in franchising, designed to protect the franchisor and subfranchisor from liabilities arising from the franchisee's day-to-day operations.
Furthermore, Section 31(B) reinforces this by stating the franchisee must indemnify, defend, and hold the subfranchisor, Exit, and their affiliates harmless from any claim and associated costs, including attorney's fees, arising from the franchisee's business operation. However, franchisees are not obligated to indemnify or hold harmless an indemnified party for losses to the extent that they are determined to have been caused solely and directly by the indemnified party's gross negligence or recklessness, willful misconduct, strict liability, or fraud.
Prospective Exit franchisees should carefully consider this obligation and ensure they have adequate insurance coverage and risk management practices in place to mitigate potential liabilities. Understanding the scope of this indemnification is crucial for assessing the financial and legal risks associated with operating an Exit franchise.