Does the waiver of punitive damages in the Bft franchise agreement prevent a party from claiming consequential damages?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.7 Waiver of Punitive Damages. The Parties hereby waive to the fullest extent permitted by law, any right to or claim for any punitive, exemplary, incidental, indirect, special or consequential damages (including, without limitation, lost profits) against each other arising out of any cause whatsoever (whether such cause be based in contract, negligence, strict liability, other tort or otherwise) and agrees that in the event of a dispute, recovery is limited to actual damages.
If any other term of this Agreement is found or determined to be unconscionable or unenforceable for any reason, the foregoing provisions shall continue in full force and effect, including, without limitation, the waiver of any right to claim any consequential damages.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the franchise agreement includes a waiver that affects the ability of both the franchisor and franchisee to claim certain types of damages in the event of a dispute. Specifically, both parties waive, to the fullest extent permitted by law, any right to claim punitive, exemplary, incidental, indirect, special, or consequential damages, including lost profits. This waiver applies to any cause of action, whether based in contract, negligence, strict liability, tort, or otherwise.
This means that if a dispute arises between Bft and a franchisee, the potential recovery is limited to actual damages. Neither party can seek additional compensation for things like lost future profits or other indirect losses. However, there is an exception for Bft, which can claim expectation or consequential damages, including lost future royalties, if the franchise agreement is terminated due to the franchisee's default.
This waiver is significant for prospective franchisees because it limits their potential financial recovery in case of disputes with Bft. While it applies to both parties, the franchisor retains the right to claim consequential damages under specific circumstances, creating an imbalance. Franchisees should carefully consider this limitation and seek legal advice to understand the full implications before entering into the franchise agreement. The agreement also states that even if any other term is found to be unenforceable, the waiver of consequential damages remains in effect.