What is included in the definition of 'Losses' for which a Moes Southwest Grill franchisee may be liable for indemnification?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
You must defend, indemnify, and hold harmless us and our affiliates, our and their permitted successors and assigns, and each of our and their respective direct and indirect owners, directors, officers, managers, employees, agents, attorneys, and representatives (collectively, the "Indemnified Parties") from and against all Losses (defined below), which any of the Indemnified Parties may suffer, sustain, or incur as a result of a claim asserted or inquiry made formally or informally, or a legal action, investigation, or other proceeding brought, by a third party and directly or indirectly arising out of or relating to: (i) the operation of the Franchised Business; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any Law; or (v) any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees. "Losses" include all obligations, liabilities, damages (actual, consequential, or otherwise), and reasonable defense costs that any Indemnified Party incurs.
Defense costs include arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced.
Source: Item 22 — Contracts (FDD page 92)
What This Means (2025 FDD)
According to Moe's Southwest Grill's 2025 Franchise Disclosure Document, franchisees are required to indemnify the franchisor and its affiliates against all 'Losses.' These 'Losses' encompass a broad range of financial obligations and expenses that the franchisor may incur due to claims or inquiries related to the franchisee's business operations. This indemnification clause is a standard provision in franchise agreements, designed to protect the franchisor from liabilities arising from the franchisee's actions.
Specifically, the definition of 'Losses' includes all obligations, liabilities, damages (whether actual or consequential), and reasonable defense costs that the franchisor incurs. Defense costs are further defined to include arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses related to litigation, arbitration, or alternative dispute resolution. This means that if a third party brings a claim against the franchisor related to the franchisee's operations, the franchisee may be responsible for covering not only the damages awarded but also all associated legal and investigative expenses.
This indemnification obligation arises from claims related to (i) the operation of the Franchised Business; (ii) the business you conduct under this Agreement; (iii) your breach of this Agreement; (iv) your noncompliance or alleged noncompliance with any Law; or (v) any allegation that we or another Indemnified Party is a joint employer or otherwise responsible for your acts or omissions relating to your employees. However, the franchisee is not responsible for indemnifying the franchisor for losses caused solely and directly by the franchisor's gross negligence or willful misconduct, as determined by a court or arbitrator. Franchisees should be aware of the breadth of this indemnification obligation and ensure they maintain adequate insurance coverage to mitigate potential financial exposure.
The franchisee's indemnification obligations continue even after the franchise agreement expires or terminates. The franchisor is not required to seek recovery from any insurer or mitigate its losses before claiming against the franchisee under this indemnification clause. This places a significant responsibility on the franchisee to manage their business in a way that minimizes the risk of third-party claims and to understand the full scope of their potential financial liabilities under the franchise agreement.