Does the expiration or termination of the Stretch Zone franchise agreement affect the franchisee's indemnification obligations?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Your obligations under this Section 14.2 will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination.
- (c) Despite Section 14.2(a), you have no obligation to indemnify or hold harmless an Indemnified Party for, and we will reimburse you for, any Losses (including costs of defending any Proceeding under Section 14.2(b)) to the extent they are determined in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction to have been caused solely and directly by the Indemnified Party's willful misconduct or gross negligence, so long as the claim to which those Losses relate is not asserted on the basis of theories of vicarious liability (including agency, apparent agency, or joint employer) or our failure to compel you to comply with this Agreement, which are claims for which you are not entitled to indemnification pursuant to this Section 14.2(c).
However, nothing in this Section 14.2(c) limits your obligation to defend us and the other Indemnified Parties under Section 14.2(b).
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone Franchise Disclosure Document, the franchisee's obligations to indemnify Stretch Zone continue even after the franchise agreement expires or is terminated. Specifically, the obligations outlined in Section 14.2 of the agreement remain in full effect, regardless of the agreement's status.
This means that even after a Stretch Zone franchise closes, the former franchisee may still be responsible for covering losses, damages, or legal costs that Stretch Zone incurs due to the franchisee's actions or operation of the business. This indemnification extends to various claims and proceedings, as detailed in the franchise agreement.
However, there is an exception: the franchisee is not required to indemnify Stretch Zone for losses caused solely and directly by Stretch Zone's willful misconduct or gross negligence, provided that the claim is not based on vicarious liability or Stretch Zone's failure to compel compliance with the agreement. Even with this exception, the franchisee's obligation to defend Stretch Zone in legal proceedings remains in place.