Under what circumstances will Stretch Zone reimburse the franchisee for Losses related to indemnification?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
(c) Despite Section 8.15(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 8.15(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 8.15(c). However, nothing in this Section 8.15(c) limits your obligation to defend us and the other Indemnified Parties under Section 8.15(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 Stretch Zone's 2025 Franchise Disclosure Document, under certain conditions, a franchisee may be reimbursed for losses related to indemnification. Specifically, Stretch Zone will reimburse the franchisee for any losses, including the costs of defending legal proceedings, if a court or arbitrator issues a final, unappealable ruling determining that these losses were caused solely and directly by the Indemnified Party's (typically Stretch Zone itself) willful misconduct or gross negligence.
However, this reimbursement is contingent on the claim not being based on theories of vicarious liability, such as agency, apparent agency, joint employer, or Stretch Zone's failure to compel the franchisee to comply with the agreement. In such cases, the franchisee would not be entitled to indemnification. It's important to note that this reimbursement provision does not limit the franchisee's obligation to defend Stretch Zone and other Indemnified Parties.
This means that while Stretch Zone franchisees are generally responsible for defending the company against certain claims, they can be reimbursed for losses if those losses are directly and solely the result of Stretch Zone's own serious misconduct or negligence, as determined by a court or arbitrator. However, the franchisee remains obligated to provide a defense even in these circumstances. This provision aims to protect franchisees from bearing the costs of Stretch Zone's direct wrongdoing, while also ensuring the franchisee fulfills their defense obligations.