Under what circumstances is a Noodles & Company franchisee required to indemnify the company?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
FOR THE SITE LOCATED AT: In consideration of, and as an inducement to, the execution of the Noodles & Company Franchise Agreement dated as of , (the "Agreement") by and between Noodles & Company ("Franchisor"), and ("Franchisee"), each of amendments). the undersigned owners of a 10% or greater interest in Franchisee hereby personally, unconditionally and irrevocably: (1) guarantees to Franchisor and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that Franchisee shall timely perform each and every undertaking, agreement and covenant set forth in the Agreement (and any amendments), including the timely performance of all financial obligations, and that each and every representation of Franchisee made in connection with the Agreement (and any amendments) are true, correct and complete in all respects at and as of the time given; and (2) agrees personally to be bound by, and personally liable for the breach of, each and every provision in the Agreement (and any Notwithstanding the foregoing, the undersigned shall have no obligation under Section 7.02 or 7.03 of the Franchise Agreement after the second anniversary of the later of (a) the date of the undersigned ceases to have an ownership interest in Franchisee or (b) the date of undersigned ceases to render services to the Franchisee. Each of the undersigned waives: (a) acceptance and notice of acceptance by Franchisor of the foregoing undertakings; (b) notice of demand for payment of any indebtedness or non-performance of any obligations hereby guaranteed; (c) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; (d) any right he or she may have to require that an action be brought against Franchisee or any other person as a condition of liability; (e) notice of any amendment to the agreement; and (f) any and all other notices and legal or equitable defenses to which he or she may be entitled.
Source: Item 22 — CONTRACTS (FDD pages 98–99)
What This Means (2025 FDD)
Based on the 2025 Noodles & Company Franchise Disclosure Document, the circumstances under which a franchisee must indemnify the company are not explicitly detailed in the provided excerpts. However, the FDD does include a contract requiring the personal guaranty of the franchisee's obligations.
The document includes a 'PRINCIPAL OWNERS' PERSONAL GUARANTY OF FRANCHISEE'S OBLIGATIONS' contract. This contract stipulates that owners with a 10% or greater interest in the franchisee personally, unconditionally, and irrevocably guarantee the franchisee's timely performance of all obligations under the Franchise Agreement, including financial obligations. This guarantee extends for the term of the agreement and any amendments.
Furthermore, these principal owners agree to be personally bound by and liable for any breach of the Franchise Agreement. They also waive certain rights, including the need for the franchisor to provide notice of acceptance, demand for payment, or notice of default. This means that Noodles & Company can seek recourse directly from the principal owners for the franchisee's failures without needing to first pursue action against the franchisee itself. However, the obligation under Sections 7.02 or 7.03 of the Franchise Agreement is lifted after the second anniversary of the date the owner ceases to have an ownership interest or ceases to render services to the franchisee.
While the excerpts do not specifically use the term 'indemnify,' the personal guarantee effectively transfers financial responsibility for the franchisee's obligations to the principal owners, which functions similarly to indemnification in protecting Noodles & Company from losses due to the franchisee's actions or inactions. A prospective franchisee should carefully review the full Franchise Agreement and consult with a legal professional to fully understand the scope and implications of this personal guarantee.