Does the Exit subfranchisor have an obligation to indemnify the franchisee, and if so, under what circumstances?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
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 subfranchisor does have an obligation to indemnify the franchisee under specific circumstances. The subfranchisor will indemnify and hold the franchisee harmless against any claim arising, directly or indirectly, from the subfranchisor's acts, omissions, contracts, debts, or obligations. This also extends to covering the costs of defending against any such claim.
However, the franchisee has 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. This creates a balance where each party is responsible for their own actions and negligence.
This indemnification clause is a standard practice in franchising, designed to protect franchisees from liabilities arising from the subfranchisor's actions. Prospective Exit franchisees should carefully review this section of the Franchise Agreement with legal counsel to fully understand their rights and obligations regarding indemnification.