What is the Gold Star franchisee's obligation regarding legal and accounting fees incurred by the company in defending against claims?

According to Gold Star's 2025 Franchise Disclosure Document, franchisees are obligated to indemnify, defend, and hold Gold Star harmless from claims arising directly or indirectly from the operation of the store. This includes responsibility for all costs, including legal and accounting fees, that Gold Star incurs while defending against or responding to such claims. However, this indemnification does not extend to liabilities caused by the franchisee's proper reliance on procedures or materials provided by Gold Star, or by Gold Star's own gross negligence.

In practical terms, this means that if a customer or employee brings a claim against Gold Star due to something related to the franchisee's store operations, the franchisee is responsible for covering Gold Star's legal and accounting expenses in defending against that claim. This could include a wide range of issues, such as a slip-and-fall accident at the store, a food poisoning incident, or a dispute with a vendor. The franchisee's obligation to defend and indemnify Gold Star is a significant financial responsibility.

However, there are exceptions. If the claim arises because the franchisee correctly followed Gold Star's procedures or used materials that Gold Star provided, or if the claim is due to Gold Star's own gross negligence, then the franchisee is not responsible for indemnifying Gold Star. It is important for franchisees to understand the scope of this indemnification clause and to ensure they have adequate insurance coverage to protect themselves against potential claims. Franchisees should also carefully document their adherence to Gold Star's procedures and materials to protect themselves in case a claim arises.

This type of indemnification clause is common in franchise agreements, as it protects the franchisor from liabilities arising from the franchisee's day-to-day operations. However, the specific terms of the clause can vary, so it is important for prospective franchisees to carefully review the franchise agreement and understand their obligations. Franchisees should consult with an attorney and insurance professional to fully understand the risks and ensure they have adequate protection.