Does the indemnity obligation of a Fly To Fit franchisee continue after the franchise agreement ends?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.1 Indemnity. Franchisee shall indemnify and defend (with counsel reasonably acceptable to Fly To Fit Franchise) Fly To Fit Franchise, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against Fly To Fit Franchise and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
Source: Item 22 — CONTRACTS (FDD page 44)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, the franchisee's obligation to indemnify Fly To Fit continues even after the franchise agreement ends. Specifically, the franchisee must indemnify and defend Fly To Fit, its parent entities, subsidiaries, affiliates, and their respective owners, directors, officers, employees, agents, successors, and assignees against all losses in any action related to the operation of the Fly To Fit business.
This means that even after the franchise agreement expires or is terminated, a former Fly To Fit franchisee could still be held responsible for financial losses resulting from lawsuits or other actions connected to their past operation of the business. This obligation extends to covering legal defense costs as well.
However, the franchisee is not required to indemnify Fly To Fit for actions arising from the intentional misconduct or negligence of Fly To Fit itself. Additionally, any delay or failure by Fly To Fit to notify the franchisee of an action will only relieve the franchisee of their indemnity obligation if the delay materially prejudices the franchisee. The franchisee cannot settle any action without the consent of Fly To Fit. This extended liability is a significant consideration for prospective franchisees, as it represents a long-term financial risk even after they are no longer operating the business.