What is the scope of Aw's indemnification of the franchisee regarding damages from third-party claims?
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 will indemnify franchisees against damages they are held liable for in third-party proceedings that arise from the franchisee's use of Aw's marks. This protection applies only if the franchisee's use of the marks complies with the franchise agreement. Aw will also reimburse the franchisee for costs reasonably incurred in defending against such claims where the franchisee is named as a party, provided the franchisee promptly notifies Aw of the claim and complies with the agreement. Aw retains the sole right to defend any such claim.
However, Aw's indemnification specifically excludes consequential damages, such as loss of revenue or profits. This means that while Aw will cover direct damages and defense costs related to covered third-party claims, the franchisee is responsible for any indirect losses stemming from the claim.
This indemnification is a benefit to the franchisee, as it provides financial protection against certain liabilities arising from the use of Aw's trademarks. However, the franchisee must ensure they adhere to the franchise agreement and promptly inform Aw of any claims to be eligible for indemnification. The exclusion of consequential damages is a limitation that franchisees should consider, as these types of damages can sometimes be substantial.