Is the Gold Star franchisee required to indemnify the company for claims arising from the franchisee's conduct of business, even if not compliant with the agreement?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISEE shall indemnify and hold harmless (and at the option of the COMPANY defend) the COMPANY, its officers, directors, employees, agents, affiliates, successors and assigns, from and against any and all claims, demands, losses, obligations, judgments, settlements, penalties, damages, liabilities, costs or expenses (including but not limited to court costs and reasonable attorneys' fees) of any kind whatsoever (including expenses of investigation, defense, prosecution or settlement) directly or indirectly based upon, arising out of, or in any way related to (a) the construction, operation or condition of any part of the Business or the Store, (b) the conduct of business thereat (whether or not such business is conducted in compliance with the provisions of this Agreement), (c) the ownership or possession of real or personal property by FRANCHISEE or (d) any act or omission of any kind of FRANCHISEE or any of its agents, employees, contractors, invitees or representatives. FRANCHISEE's indemnity obligations shall exclude only any liability of an indemnified party which is determined by a court of competent jurisdiction to have resulted solely and directly from the gross negligence or willful misconduct of such indemnified party. This provision will survive any termination or expiration of this Agreement.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees are required to indemnify Gold Star for claims, losses, and expenses related to the operation of the business, regardless of whether the business is conducted in compliance with the franchise agreement. Specifically, the franchisee must indemnify and hold harmless Gold Star, its officers, directors, employees, agents, affiliates, successors, and assigns from any claims, demands, losses, obligations, judgments, settlements, penalties, damages, liabilities, costs, or expenses, including court costs and reasonable attorneys' fees. This indemnification extends to claims based upon, arising out of, or in any way related to the construction, operation, or condition of the business or store, the conduct of business, and any act or omission of the franchisee or their agents, employees, contractors, invitees, or representatives.
This obligation means that a Gold Star franchisee could be financially responsible for legal and other costs incurred by Gold Star due to the franchisee's actions or the actions of their staff. This responsibility exists whether or not the franchisee was following the franchise agreement. The franchisee's indemnity obligations exclude any liability of an indemnified party resulting solely and directly from the gross negligence or willful misconduct of that indemnified party.
This indemnification clause is a standard practice in franchising, designed to protect the franchisor from liabilities arising from the franchisee's independent operation of their business. However, the broad scope of the clause means franchisees must be diligent in operating their Gold Star location in compliance with all applicable laws and the franchise agreement to minimize potential liabilities. This provision survives any termination or expiration of the agreement, meaning potential liabilities could extend beyond the term of the franchise agreement.