Does the Aw franchise agreement allow for indirect or punitive damages for claims arising from the agreement?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 18.7. Limitation of Damages. Except as explicitly provided in this Agreement, for any claim concerning performance or non-performance by either party pursuant to, or in any way related to the subject matter of this Agreement, any party's sole liability, if any, shall be limited by actual damages. For any claim that arises out of or in connection with this Agreement, whether such claim is in contract, tort or otherwise, except as otherwise explicitly provided herein, under no circumstances shall either party be liable for indirect, exemplary, incidental, consequential, aggravated or punitive damages, including, but not limited to, loss of anticipated income, profits or savings, or loss resulting from business interruption.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the franchise agreement includes a limitation of damages. Specifically, for any claim arising out of or connected with the agreement, neither party is liable for indirect, exemplary, incidental, consequential, aggravated, or punitive damages. This encompasses losses such as anticipated income, profits, savings, or those resulting from business interruption.
This limitation on damages means that if a franchisee has a claim against Aw, or vice versa, the claiming party can generally only recover actual direct damages. The franchisee would be unable to recover for more speculative or indirect losses, which could significantly limit the potential recovery in a dispute.
However, there is an exception: Aw is willing to indemnify the franchisee against damages from third-party claims arising from the franchisee's use of Aw's marks, provided the franchisee's use complies with the agreement. This indemnification excludes consequential damages like lost revenue or profits. This means Aw will cover direct damages the franchisee is liable for in such cases, but not indirect losses.
This type of limitation on liability is relatively common in franchise agreements. Prospective Aw franchisees should carefully consider the implications of this clause and consult with legal counsel to understand their rights and potential remedies under the agreement.