Indemnity
What it means
An indemnity shifts risk. In a franchise agreement, the franchisee typically indemnifies the franchisor against losses arising from the franchisee's operation, claims, breaches, or conduct at the outlet.
Indemnities can be broad, sometimes broader than the underlying legal liability would be, so their exact wording matters. They are a key place where risk is allocated between the parties.
In practice
Have a lawyer review the indemnity's scope. Watch for indemnities that make you liable for the franchisor's own negligence or for losses beyond your control, and negotiate to narrow them.
A real example
A franchise agreement requires the franchisee to indemnify the franchisor for any customer claims arising at the outlet; the franchisee's lawyer narrows it so it excludes losses caused by the franchisor's own products.
Indemnity, FAQs
What is an indemnity in a franchise agreement?
A promise to compensate the franchisor for specified losses, typically those arising from the franchisee's operation or breaches. It allocates risk and can be broad, review the wording.
Can an indemnity be too broad?
Yes. Some indemnities make you liable even for the franchisor's own negligence. Have a lawyer check the scope and negotiate to narrow it where possible.
See the full franchise glossary, the Fee Index or our buyer guides.