Under the Exit franchise agreement, can either party be held liable for any act or omission of the other party?
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 franchise agreement specifies that neither party is typically liable for the acts or omissions of the other. The franchisee operates as an independent contractor, and is responsible for their own actions.
However, the franchisee is required to indemnify, defend, and hold Exit, the subfranchisor, their affiliates, officers, directors, employees, and officials harmless against any claims arising from the franchisee's business operations. This includes covering costs such as attorney's fees related to defending against such claims. Conversely, the subfranchisor must indemnify and protect the franchisee from claims resulting from the subfranchisor's actions, omissions, contracts, debts, or obligations, including the costs of defense.
This indemnification does not extend to losses caused directly by the indemnified party's gross negligence, recklessness, willful misconduct, strict liability, or fraud. This means that if Exit or the subfranchisor's own actions directly lead to a loss, the franchisee is not obligated to cover those losses. This clause aims to protect both parties from liabilities arising from each other's business conduct, while also ensuring accountability for direct misconduct or negligence.