Franchisors must protect their companies from lawsuits and liability. The indemnification and disclaimer clauses in franchise agreements, while not always upheld, are at least one way to help with this along with other strategies.

In my franchise agreements for my company, I addressed this issue by slightly modifying our disclaimer clauses in our franchise agreements. Below is a copy of one of the first versions of the clauses that we use in our franchise agreements;

3.26 Indemnification / Disclaimer

The franchisee agrees to defend itself at its own cost and to indemnify and hold the franchisor, its affiliates and its predecessor, sister or co-branded companies, their shareholders, directors, officers, members, employees, agents and their spouses, harmless to and against any and all losses, costs, expenses (including attorneys’ fees), damages and liabilities arising from your negligence, lack of maintenance or repair, breach of contract or other civil damages, which directly or indirectly result from or pertain to the use , condition, equipment, maintenance or operation of your car wash unit / truck, including the preparation and sale of any products or services manufactured or sold with your mobile car wash unit. Said losses, claims, costs, expenses, damages and liabilities will include, without limitation, those arising from latent or other defects in trucks, units and equipment, whether discovered by the Franchisor or not, and those arising from death or injury to any person or arising from damage to your property or ours, our agents or employees, or any third person, firm or corporation, whether such losses, claims, costs, expenses, damages or liabilities were actually caused or allegedly in whole or in part through our active or passive negligence or any of our agents or employees or as a result of any strict liability imposed on the Franchisor or any of our employees.

The Franchisee will indemnify and hold the Franchisor and its affiliates and their predecessors, sisters or co-branded companies free and harmless from and against all reasonable fees, liabilities, expenses, claims, lawsuits, actions or causes of action of reasonable attorneys in which incurred. by or threatened against the Franchisor or its affiliates and arising from

(i) the operation of the Franchisee of the Franchised Business, or

(ii) any transaction between the Franchisee and any third party or

(iii) Misuse of the Trademarks by the Franchisee.

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All franchises in the company need to be concerned about this and it would be very smart and prudent to contact a knowledgeable and experienced franchise attorney to ensure that you are protected in your franchise agreements. I hope they address this in 2006.