What is the Exit franchisee's obligation regarding indemnification of the Subfranchisor?
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 is required to indemnify, defend, and hold harmless the subfranchisor, Exit, and their affiliates, officers, directors, employees, and officials against any claims and costs, including reasonable attorney's fees. This obligation arises from any claim connected to the franchisee's operation of the business during and after the term of the agreement. This indemnification specifically includes claims from franchisees relating to all services which the franchisee has agreed or subsequently agrees or undertakes to perform on the subfranchisor's behalf.
However, the Exit franchisee is not obligated to indemnify or hold harmless the subfranchisor for losses caused solely and directly by the subfranchisor's gross negligence, recklessness, willful misconduct, strict liability, or fraud. The subfranchisor, in turn, must indemnify and save the franchisee harmless against any claim arising from the subfranchisor's acts, omissions, contracts, debts, or obligations, and against the cost of defending against any such claim.
This indemnification clause means that as an Exit franchisee, you could be responsible for covering legal costs and damages incurred by the subfranchisor due to your business operations. It is important to operate the franchise responsibly and in compliance with all applicable laws and regulations to minimize the risk of such claims. Conversely, the subfranchisor is responsible for their own actions and must protect the franchisee from claims arising from their conduct. Franchisees should consult with a legal professional to fully understand the implications of this indemnification clause and to ensure they have adequate protection and insurance coverage.