What damages will Aw NOT reimburse a franchisee for in the event of a claim against the use of the marks?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
We are not required to protect your use of the Marks or to defend you against a claim against your use of the Marks, although we have the right to defend the claim if we so choose to do so. We will indemnify you against, and reimburse you for all damages (except for any consequential damages, including loss of revenue and/or profits) for which you are held liable, and for all costs you reasonably incur in the defense of any claim in which you are named as a party, in any proceeding brought against you by any third party arising out of your use of any Mark, so long as your use of the Marks was in compliance with the Franchise Agreement and our rules and you have timely notified us of the claim or proceeding.
Source: Item 13 — TRADEMARKS (FDD pages 30–32)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw will indemnify franchisees against damages in certain legal claims regarding the use of their trademarks. However, Aw will not reimburse franchisees for consequential damages, including loss of revenue and/or profits. This means that while Aw will cover direct damages and reasonable costs incurred in defending against a claim, franchisees will be responsible for any indirect losses, such as lost income or business opportunities, resulting from the claim.
This policy has significant implications for prospective Aw franchisees. If a franchisee faces a legal claim related to trademark usage, they need to be aware that Aw's financial support is limited. While Aw will cover the immediate damages and legal defense costs, the franchisee will have to bear the burden of any lost revenue or profits resulting from the situation. This could be a substantial financial risk, especially if the legal proceedings are lengthy or if the claim significantly impacts the franchisee's ability to operate their business.
Franchisees should carefully consider this limitation and evaluate their own risk tolerance. It may be prudent to obtain additional insurance coverage to protect against potential losses of revenue or profits in the event of a trademark-related claim. Additionally, franchisees should ensure they fully comply with Aw's rules and guidelines regarding trademark usage to minimize the risk of such claims arising in the first place. Understanding the scope of Aw's indemnification policy is crucial for franchisees to make informed decisions about risk management and financial planning.
In the franchise industry, it is common for franchisors to offer some form of indemnification to franchisees regarding trademark use. However, the specific terms and limitations of these indemnification agreements can vary significantly. Some franchisors may provide more comprehensive coverage, including consequential damages, while others may have stricter limitations or exclusions. Prospective franchisees should carefully review the indemnification provisions in the franchise agreement and compare them to industry standards to assess the level of protection offered.