Under what circumstances is the limitation of liability NOT applicable to either party in the Carls Jr. agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
s (including reasonable outside attorney'sfees) arising out of or relating to (i) any action against Olo arising out of any Customer Third Party Provider's disclosure or misuse of Customer Data or related to Olo's release of such Customer Data, including PII, if the release of such information was requested in writing by Customer; (ii) Customer's failure to properly collect and remit taxes or other government payments or fees associated with its usage of the Services, which shall be the sole responsibility of the Customer and, if applicable, the Authorized Operators; and (iii) the transfer of Customer Data by any means not recommended or deemed reasonably secure by Olo.
- 7.3. The Indemnified Party must (a) promptly notify the Indemnifying Party in writing of any third-party claim (provided that a failure to promptly notify will not relieve the Indemnifying Party of its indemnification obligations, except to the extent it has been prejudiced by such failure); (b) reasonably cooperate with the Indemnifying Party in the defense of the matter; and (c) give the Indemnifying Party primary control of the defense of the matter and negotiations for its settlement. The Indemn
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the limitation of liability clause does not apply to either party's intellectual property (IP) infringement indemnification obligations, a party's gross negligence, willful misconduct, or breach of confidentiality, data privacy, or data security. This means that Carls Jr. or the franchisee can be held fully liable for damages resulting from these specific actions, regardless of the general limitations on liability outlined in the agreement.
This exception to the limitation of liability is significant for prospective Carls Jr. franchisees because it highlights areas where the franchisor is unwilling to cap its potential financial responsibility. For instance, if Carls Jr. is grossly negligent in its oversight of the franchise system, leading to substantial financial losses for the franchisee, the limitation of liability would not protect Carls Jr. from being held fully accountable. Similarly, if a franchisee engages in willful misconduct that harms the Carls Jr. brand, they cannot rely on the liability cap to limit their financial exposure.
The inclusion of IP infringement, gross negligence, willful misconduct, and breaches of confidentiality, data privacy, and data security as exceptions to the limitation of liability is fairly standard in franchise agreements. These exceptions reflect the importance of protecting intellectual property, maintaining ethical business practices, and safeguarding sensitive information. The agreement also states that each party's total cumulative liability arising from or relating to the agreement will not exceed $5,000,000, but for the exclusions mentioned above.
Prospective Carls Jr. franchisees should carefully consider the implications of these exceptions and understand the potential risks associated with these types of actions. It is advisable to seek legal counsel to fully understand the scope of these exceptions and how they might impact their rights and obligations under the franchise agreement. Understanding these exceptions is crucial for making an informed decision about investing in a Carls Jr. franchise.