What are the implications of the litigation involving Noodles & Company (Item 3) on the franchisee's ability to obtain insurance coverage for the restaurant?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
hichever is less) would pay for a similar claim under your applicable policy.
- (c) Further, we, and our applicable Affiliate, at our respective sole discretion, are entitled, but not obligated, to prosecute, defend and/or settle any proceeding arising out of any claim made against you, that, in our opinion, could have an adverse impact on the brand, system or other Noodles & Company Company-owned or Area Operator owned Restaurants. We, and our applicable Affiliate, have no obligation to indemnify or reimburse you for any fees or disbursements of any legal counsel retained by you or to pay any settlement ourselves; however, we shall be entitled to settle and defend the claim. We will work with your insurance carrier to reach terms and provide a defense that is acceptable to your insurance carrier, if your insurance carrier has a right of acceptance, and we shall endeavor to do so provided doing so does not jeopardize the Company's rights and defenses or the brand, system or other Noodles & Company owned or Area Operator owned Restaurants.
- (d) Notwithstanding anything to the contrary in this Agreement, in the event that Noodles & Company's insurance does not cover either the costs of defense or
attorney's fees, or any portion of them, or damages, liability or settlement amounts, or any portion of them, associated with any Indemnified Claim or other claim for which Area Operator is otherwise entitled to indemnification, Noodles & Company is not obligated to indemnify Area Operator to the extent that Noodles & Company's insurance does not provide coverage. Furthermore, Noodles & Company's obligation to indemnify, defend or pay for damages of any claim for which Area Operator would otherwise be entitled to indemnification arises only if and to the extent that Area Operator's insurance coverage does not or would not (absent any right to indemnification by Noodles & Company) provide coverage for such claims. In the event that Area Operator has failed to obtain and keep in force all policies that it is obligated to carry under the terms of its agreements with Noodles & Company and one or more of such policies would or could have provided coverage for the claim, then Noodles & Company is not obligated to indemnify, defend or pay damages, settlements, or have any liability for such claim.
6. FEES.
6.01 Franchise Fee.
What This Means (2025 FDD)
Based on the 2025 Noodles & Company Franchise Disclosure Document, Item 23 addresses insurance-related matters and their interplay with potential litigation. Specifically, Noodles & Company states that they will collaborate with the franchisee's insurance carrier to establish defense terms acceptable to the carrier, assuming the carrier has the right of acceptance. This collaboration is conditional, as Noodles & Company will only do so if it does not compromise the company's rights, defenses, brand, system, or other Noodles & Company or Area Operator-owned restaurants.
However, Noodles & Company's obligation to indemnify or defend the Area Operator is limited by the extent of insurance coverage. If Noodles & Company's insurance does not cover defense costs, attorney's fees, damages, liability, or settlement amounts, Noodles & Company is not obligated to provide indemnification to the extent of the uncovered amounts. Furthermore, Noodles & Company's duty to indemnify, defend, or pay damages arises only if the Area Operator's insurance coverage does not provide coverage for such claims.
Moreover, if the Area Operator fails to maintain the required insurance policies as stipulated in their agreements with Noodles & Company, and such policies could have provided coverage for the claim, Noodles & Company is not obligated to indemnify, defend, pay damages, settlements, or have any liability for the claim. This indicates that franchisees must maintain the required insurance coverage to ensure Noodles & Company fulfills its indemnification obligations. Franchisees are also required to furnish evidence of insurance coverage and premium payments to Noodles & Company both before opening and annually thereafter. Failure to maintain required insurance coverage allows Noodles & Company to obtain such coverage on the franchisee's behalf, with the franchisee bearing the costs and premiums incurred.