What is the scope of the Kidokinetics franchisee's indemnification obligation to the franchisor?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
such action and the cost.
- 14.4. Indemnification. Franchisee and Franchisee's principals agree to indemnify, defend and hold Franchisor, its affiliates, and its respective members, directors, officers, employees, agents, partners, shareholders, agents, contractors, successors, assignees, personal representatives, heirs and legatees of all these persons or entities ("Indemnitees") harmless to the fullest extent permitted by law, from and against and to reimburse them for all claims, obligations, liabilities and damages ("Claims"), including any and all taxes, directly or indirectly arising out of, in whole or in part: (a) the operation of Franchisee's Kidokinetics Business, and Franchisee's advertising; (b) the use of the Marks and other Confidential Information; (c) the transfer of any interest in this Agreement or Franchisee's Kidokinetics Business in any manner not in accordance with this Agreement; (d) the infringement, alleged infringement, or any other violation or alleged violation by Franchisee or any of Franchisee's principals of any patent, mark or copyright or other proprietary right owned or controlled by third parties; or (e) libel, slander or any other form of defamation of Franchisor, the System, or System franchisees by Franchisee or any of Franchisee's principals. For purposes of this indemnification, "Claims" will mean and include all obligations, actual, consequential, punitive and other damages, and costs reasonably incurred in the defense of any action, including attorneys', attorney assistants' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, whether or not such claims exceed the amount of insurance coverage available to Franchisor through Franchisee. Franchisor has the right to defend any such claim against Franchisor in the manner Franchisor deems appropriate or desirable in Franchisor's discretion. Such an undertaking by Franchisor will, in no manner or form, diminish Franchisee's and each of Franchisee's principals' obligations to indemnify the Indemnitees and to hold them harmless. This indemnity will continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
Franchisee agrees to give Franchisor notice of any action, suit, proceeding, claim, demand, inquiry, or investigation described above. The Indemnitees shall have the right, in their sole discretion, to: (i) retain counsel of their own choosing to represent them with respect to any Claim; and (ii) control the response thereto and the defense thereof, including the right to enter into an agreement to settle such Claim. Franchisee may participate in such defense at its own expense.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, the franchisee has extensive indemnification obligations to the franchisor. The franchisee must indemnify, defend, and hold harmless Kidokinetics, its affiliates, and their respective members, directors, officers, employees, agents, partners, shareholders, agents, contractors, successors, assignees, personal representatives, heirs, and legatees from all claims, obligations, liabilities, and damages, including taxes, arising directly or indirectly from several sources. These sources include the operation of the franchisee's Kidokinetics business and advertising, the use of the Kidokinetics marks and confidential information, and the transfer of any interest in the Franchise Agreement or the Kidokinetics business in a manner not compliant with the agreement.
This indemnification extends to claims related to infringement or alleged infringement of patents, marks, copyrights, or other proprietary rights of third parties by the franchisee or its principals. It also covers libel, slander, or any other form of defamation of Kidokinetics, the Kidokinetics system, or other Kidokinetics franchisees by the franchisee or its principals. The definition of "Claims" for indemnification purposes includes all obligations, actual, consequential, punitive, and other damages, as well as costs reasonably incurred in the defense of any action. These costs encompass attorneys', attorney assistants', and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, regardless of whether such claims exceed the amount of insurance coverage available to Kidokinetics through the franchisee.
Kidokinetics retains the right to defend any claim against it in any manner it deems appropriate or desirable. The franchisee's obligation to indemnify the franchisor is not diminished by any action taken by Kidokinetics to defend itself. Additionally, the franchisee must indemnify Kidokinetics if Kidokinetics is held responsible for the franchisee's debts to suppliers, lessors, and creditors, or for the franchisee's unpaid federal, state, and local taxes, including individual and corporate taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, FICA taxes, personal property, and real estate taxes arising from the franchisee's operation of the Kidokinetics business.
For a prospective Kidokinetics franchisee, this broad indemnification clause signifies a substantial financial responsibility. The franchisee could be liable for a wide range of costs and damages, including legal fees and potential judgments, arising from their business operations and other actions. It is crucial for potential franchisees to fully understand the scope of this indemnification and to secure adequate insurance coverage to protect themselves against potential claims. They should also ensure compliance with all operational standards and legal requirements to minimize the risk of triggering the indemnification clause.