Under what circumstances is an Exit franchisee required to pay Subfranchisor's costs, charges, expenses, and attorneys' fees?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Should Subfranchisor employ an attorney to enforce any of the provisions of this Agreement, or to protect its interests in any manner arising from any breach of this Agreement by Franchisee, or to collect damages for the breach of this Agreement, or to prosecute or defend any suit or proceeding resulting from this Agreement, Franchisee agrees to pay Subfranchisor all costs, charges, expenses and attorneys' fees expended or incurred by Subfranchisor.
EXIT and Subfranchisor shall have the right to inspect and audit all of Franchisee's books, records, and procedures. Franchisee shall permit, and understands that it should expect, regular and frequent inspection at reasonable times, by agents or representatives of EXIT and/or Subfranchisor of all books, records, MLS agent rosters and MLS transaction reports, procedures, and services of Franchisee in order to determine compliance with this Agreement. All discrepancies shall be paid within ten (10) days after the date Franchisee receives notice of such discrepancy. If any underpayment exceeds five percent (5%) of the amount due, then Franchisee shall pay all costs and expenses relating to the audit, including, but not limited to, travel, lodging, meals, attorneys', accountants' and other professional fees.
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.
Franchisee will indemnify the Subfranchisor for all costs that it incurs in any such proceedings including, without limitation, reasonable attorneys' fees, expert witness fees, costs of investigation, court costs, accounting fees, travel and living expenses, and all other related costs incurred by Subfranchisor.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, a franchisee may be required to cover the Subfranchisor's costs, charges, expenses, and attorneys' fees in several specific situations. If the Subfranchisor has to employ an attorney to enforce the franchise agreement due to a breach by the franchisee, to protect the Subfranchisor's interests, to collect damages resulting from a breach, or to defend against any suit or proceeding arising from the agreement, the franchisee is responsible for covering all associated costs. This includes attorneys' fees expended or incurred by the Subfranchisor.
Additionally, if an audit of the franchisee's books and records reveals an underpayment exceeding five percent of the amount due, the franchisee must pay all costs and expenses related to the audit. These costs include travel, lodging, meals, attorneys', accountants', and other professional fees. Furthermore, the franchisee is obligated to defend, indemnify, and hold Exit and the Subfranchisor harmless from any claims, liability, or expenses, including attorneys' fees, that Exit or the Subfranchisor may incur due to the franchisee's business operations.
Moreover, Exit's FDD states that the franchisee will indemnify the Subfranchisor for all costs incurred in proceedings related to violations of proprietary marks, franchisee obligations upon termination, assignment of the agreement, covenants not to compete, confidentiality, or any act violating laws or impairing goodwill. These costs include reasonable attorneys' fees, expert witness fees, costs of investigation, court costs, accounting fees, travel, and living expenses. This broad range of potential liabilities underscores the importance of the franchisee's compliance with the franchise agreement and all applicable laws and regulations.