Does the Stretch Zone franchise agreement specify that the indemnification obligation includes reimbursement for reasonable defense costs, such as attorney's fees?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Indemnification. Any provision in the franchise agreement or related agreements requiring the franchisee to indemnify, reimburse, defend, or hold harmless the franchisor or other parties is hereby modified such that the franchisee has no obligation to indemnify, reimburse, defend, or hold harmless the franchisor or any other indemnified party for losses or liabilities to the extent that they are caused by the indemnified party's negligence, willful misconduct, strict liability, or fraud.
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- Attorneys' Fees. If the franchise agreement or related agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
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 franchise agreement addresses both indemnification and attorney's fees separately. Regarding indemnification, the agreement is modified to state that the franchisee is not required to indemnify, reimburse, defend, or hold harmless Stretch Zone if the losses or liabilities are caused by Stretch Zone's negligence, willful misconduct, strict liability, or fraud. This modification protects the franchisee from liability in situations where Stretch Zone is at fault.
Concerning attorney's fees, the Stretch Zone franchise agreement stipulates that a franchisee is only required to reimburse Stretch Zone for court costs or expenses, including attorney's fees, if Stretch Zone is the prevailing party in any judicial or arbitration proceeding. This means that unless Stretch Zone wins the legal action, the franchisee is not responsible for covering Stretch Zone's legal costs.
These provisions provide some financial protection to Stretch Zone franchisees. The modification to the indemnification clause prevents franchisees from being responsible for Stretch Zone's own misconduct. The attorney's fees clause ensures that franchisees are only liable for Stretch Zone's legal costs if Stretch Zone prevails in court or arbitration, aligning responsibility with the outcome of legal proceedings.