Is Aw responsible for consequential damages, such as loss of revenue or profits, in its indemnification of the franchisee?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.6 Indemnification of Franchisee. We agree to indemnify you against, and to reimburse you for, all damages (but specifically excluding any consequential damages, including, but not limited to, loss of revenue and/or profits) for which you are held liable in any proceeding brought against you by any third party arising out of your use of any Mark, so long as said use is pursuant to and in compliance with this Agreement, and for all costs you reasonably incur in the defense of any such claim in which you are named as a party, so long as you have timely notified us of the claim and have otherwise complied with this Agreement. We have the sole right to defend any such claim.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw agrees 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 franchise agreement. However, Aw specifically excludes consequential damages such as loss of revenue and/or profits from this indemnification.
This means that if a franchisee is sued by a third party for trademark infringement related to their use of Aw's marks, and the franchisee followed the agreement, Aw will cover the damages the franchisee is liable for. However, Aw will not cover any lost revenue or profits the franchisee might suffer as a result of the lawsuit.
This limitation on damages is a significant consideration for prospective Aw franchisees. While Aw will cover direct damages, franchisees need to be aware that they are responsible for any consequential losses. Franchisees may want to consider obtaining their own insurance to cover potential losses of revenue or profits in such cases.