Under what circumstances related to third-party claims does the Anago Subfranchisor's obligation to indemnify the Franchisor NOT fall under the waiver of punitive damages claims?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
EXCEPT FOR SUBFRANCHISOR'S OBLIGATION TO INDEMNIFY FRANCHISOR FOR THIRD PARTY CLAIMS UNDER SECTION 11.2, AND EXCEPT FOR PUNITIVE, EXEMPLARY OR MULTIPLE DAMAGES AVAILABLE TO EITHER PARTY UNDER UNITED STATES FEDERAL TRADEMARK LAW, FRANCHISOR AND SUBFRANCHISOR (AND YOUR FRANCHISEES) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE, EXEMPLARY OR MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN FRANCHISOR AND SUBFRANCHISOR, THE PARTY MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, the waiver of punitive damages claims between the Franchisor and Subfranchisor does not apply to the Subfranchisor's obligation to indemnify the Franchisor for third-party claims under Section 11.2 of their agreement. This means that while both parties generally waive the right to claim punitive damages from each other in the event of a dispute, this waiver does not extend to situations where the Subfranchisor is required to protect and compensate the Franchisor for losses or damages resulting from claims made by outside parties.
In essence, if a third party sues Anago Franchisor and the claim falls under the indemnification obligations of the Subfranchisor as defined in Section 11.2, the Subfranchisor may be liable for punitive damages in addition to other costs. Section 11.2 outlines various scenarios where the Subfranchisor must defend, indemnify, and hold harmless the Franchisor. These scenarios include issues arising from the Subfranchisor's operation of the Subfranchise business, nonperformance or omissions related to Unit Franchise Agreements, negligence, willful misconduct, violations of laws or regulations, breaches of the agreement, claims of employer status, or any actions by the Subfranchisor or affiliated individuals that lead to claims by Unit Franchisees, prospective Unit Franchisees, or other third parties.
This exception to the waiver of punitive damages is significant because it protects Anago Franchisor from potential financial losses resulting from the Subfranchisor's actions or inactions that lead to third-party claims. It ensures that the Franchisor can seek full compensation, including punitive damages if awarded, in cases where the Subfranchisor's conduct results in legal action from outside parties. This provision encourages Subfranchisors to operate responsibly and in compliance with all applicable laws and regulations, as they could be held liable for significant damages beyond actual losses if their actions trigger third-party lawsuits.