Does the Buns On Fire franchisor's indemnification cover consequential damages?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchisor agrees to indemnify Franchisee against, and to reimburse Franchisee for, all direct damages, excluding consequential, punitive, or special damages, for which Franchisee is held liable in any proceeding in which Franchisee's use of any Mark pursuant to and in compliance with this Agreement is held to constitute trademark infringement, unfair competition or dilution, and for all costs reasonably
incurred by Franchisee in the defense of any such claim brought against him or in any such proceedings in which he is named as a party, provided that Franchisee has timely notified the Franchisor of such claim or proceedings, has otherwise complied with this Agreement and has tendered complete control of the defense of such to the Franchisor. If the Franchisor defends such claims, the Franchisor shall have no obligation to indemnify or reimburse Franchisee with respect to any fees or disbursements of any attorney retained by Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to the 2025 Buns On Fire Franchise Disclosure Document, the franchisor's indemnification does not extend to consequential damages. Specifically, Buns On Fire will indemnify the franchisee against direct damages for trademark infringement, unfair competition, or dilution related to the franchisee's use of Buns On Fire's marks, but this excludes consequential, punitive, or special damages.
This means that if a franchisee is sued for trademark infringement due to their use of the Buns On Fire marks and incurs damages, Buns On Fire will cover the direct costs for which the franchisee is held liable. However, Buns On Fire will not be responsible for covering any consequential, punitive, or special damages that the franchisee may be ordered to pay.
For a prospective Buns On Fire franchisee, this is an important limitation to consider. While the franchisor provides some protection against trademark-related claims, the franchisee remains responsible for any consequential, punitive, or special damages that may arise from such claims. It is advisable for franchisees to fully understand the scope of this indemnification and to consider obtaining their own insurance coverage to protect against potential liabilities that are not covered by the franchisor's indemnification.