Does the indemnification agreement in the Southern Steer franchise require payment to a claimant as a condition precedent to recovery?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- Releasor hereto represents and warrants that no portion of any Claim, right, demand, obligation, debt, guarantee, or cause of action released hereby has been assigned or transferred by Releasor party to any other party, firm or entity in any manner including, but not limited to, assignment or transfer by subrogation or by operation of law. In the event that any Claim, demand or suit shall be made or institute against any Franchisor Released Party because of any such purported assignment, transfer or subrogation, the assigning or transferring party agrees to indemnify and hold such Franchisor Released Party free and harmless from and against any such claim, demand or suit, including reasonable costs and attorneys' fees incurred in connection therewith. It is further agreed that this indemnification and hold harmless agreement shall not require payment to such claimant as a condition precedent to recovery under this paragraph.
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, the indemnification agreement does not require payment to a claimant as a condition precedent to recovery. Specifically, the agreement states that if any claim, demand, or suit is made against any Franchisor Released Party due to a purported assignment, transfer, or subrogation, the assigning or transferring party must indemnify and hold the Franchisor Released Party harmless. This includes covering reasonable costs and attorneys' fees incurred in connection with the claim.
The key provision is that "this indemnification and hold harmless agreement shall not require payment to such claimant as a condition precedent to recovery under this paragraph." This means Southern Steer can seek indemnification without first having to pay out the claim to the original claimant. This clause protects Southern Steer by allowing them to pursue recovery of costs and fees related to a claim without needing to first settle the claim itself.
For a prospective franchisee, this is a favorable term in the franchise agreement. It means that Southern Steer is positioned to recover costs associated with certain claims without the upfront burden of making payments to the claimant. This can reduce the financial risk to the franchisor in the event of legal disputes arising from assignments, transfers, or subrogation. Franchisees should still carefully review the full indemnification clause to understand the scope of their responsibilities and potential liabilities.