Under what circumstances is a Lees Famous Recipe franchisee NOT required to indemnify the franchisor?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
You will indemnify us and reimburse us for all income, capital, gross receipts, sales, and other taxes that the state in which the Restaurant is located imposes as a result of your operation of the Restaurant or the license of any of our intangible property in the jurisdiction in which the Restaurant is located.
We will have no liability for any taxes that arise or result from your Restaurant, and you will indemnify us and our affiliates for any such taxes that may be assessed or levied against us which arise out of or result from your Restaurant.
If any "franchise" or other tax which is based upon the Gross Sales, receipts, sales, business activities, or operation of your Restaurant is imposed upon us or our affiliates by any taxing authority, then you will reimburse us and our affiliates for all such taxes paid by us or our affiliates.
If more than one Lee's Famous Recipe Restaurant is located in such jurisdiction, they will share the liability in proportion to their Gross Sales from the franchised business, except in the case of sales taxes and gross receipts taxes, which will be divided in proportion to taxable sales to you.
If applicable, this payment is in addition to the Royalty Fee payments described above.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
Based on the 2025 FDD, the franchisee is generally required to indemnify Lees Famous Recipe for taxes related to the restaurant's operation. Specifically, the franchisee must cover income, capital, gross receipts, sales, and other taxes imposed by the state where the restaurant is located, as well as any franchise or other tax based on gross sales or business activities. If multiple Lees Famous Recipe restaurants are in the same jurisdiction, they share the liability proportionally based on gross sales, except for sales and gross receipts taxes, which are divided based on taxable sales.
However, the FDD does not explicitly state any circumstances under which a Lees Famous Recipe franchisee is NOT required to indemnify the franchisor for tax liabilities. The franchise agreement places the responsibility for tax indemnification squarely on the franchisee.
Therefore, a prospective Lees Famous Recipe franchisee should seek clarification from the franchisor regarding any potential scenarios or conditions that might limit or eliminate the franchisee's obligation to indemnify the franchisor for tax-related matters. This would involve direct communication with Lees Famous Recipe to discuss specific situations and understand the full scope of the indemnification requirements.