Does the Exit franchisee's indemnification obligation extend beyond the term of the franchise agreement?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (B) Under no circumstances shall either party be liable for any act, omission, contract, debt, or other obligation of the other party. Franchisee shall indemnify defend (with legal counsel reasonably acceptable to the indemnitee) and hold Subfranchisor, EXIT and their Affiliates, officers, directors, employees, and officials harmless against any such claim and the cost (including reasonable attorneys' fees) of responding to, defending, settling or paying each such claim arising, directly or indirectly, from, as a result of, or in connection with Franchisee's operation of the Franchisee's business during and after the term of this Agreement. This indemnification shall specifically include claims from franchisees relating to all services which Franchisee has agreed or subsequently agrees or undertakes to perform on Subfranchisor's behalf. Subfranchisor shall indemnify and save Franchisee harmless against any claim arising, directly or indirectly, from or as a result of Subfranchisor's acts, omissions, contracts, debts, or obligations, and against the cost of defending against any such claim. Franchisees have no obligation 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.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchisee's obligation to indemnify the subfranchisor extends beyond the term of the franchise agreement. Specifically, the franchisee must indemnify, defend, and hold harmless the subfranchisor, EXIT, and their affiliates, officers, directors, employees, and officials against any claim and the cost of responding to, defending, settling, or paying each such claim. This obligation applies if the claim arises directly or indirectly from, as a result of, or in connection with the franchisee's operation of the franchisee's business during and after the term of the Agreement.
This means that even after the franchise agreement expires or is terminated, an Exit franchisee could still be held responsible for liabilities stemming from their operation of the business. This indemnification specifically includes claims from franchisees relating to all services which Franchisee has agreed or subsequently agrees or undertakes to perform on Subfranchisor's behalf.
However, Exit franchisees are not required 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. This provides some protection to the franchisee in cases where the subfranchisor's actions directly lead to the losses.