Does the Checkers franchisee's indemnification obligation apply regardless of whether a claim is reduced to judgment?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree to indemnify us, our Affiliates and our respective directors, officers, employees, shareholders, members, agents, successors and assigns (collectively "indemnitees"), and to hold the indemnitees harmless to the fullest extent permitted by law, from any and all losses and expenses (as defined below) incurred in connection with any litigation or other form of adjudicatory procedure, claim, demand, investigation, or formal or informal inquiry (regardless of whether it is reduced to judgment) or any settlement thereof which arises directly or indirectly from, or as a result of, a claim of a third party against any one or more of the indemnitees in connection with (i) your failure to perform or breach of any covenant, agreement, term or provision of this Agreement, (ii) your breach of any representation or warranty contained in this Agreement, and (iii) any allegedly unauthorized service or act rendered or performed in connection with this Agreement, (collectively "event") and regardless of whether it resulted from any strict or vicarious liability imposed by law on the indemnitees.
The foregoing indemnity shall apply even if it is determined that the indemnitees' negligence caused such loss, liability or expense, in whole or in part, provided, however, that this indemnity will not apply to any liability arising from a breach of this Agreement by the indemnitees or the gross negligence or willful acts of indemnitees (except to the extent that joint liability is involved, in which event the indemnification provided herein will extend to any finding of comparative or contributory negligence attributable to you).
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the franchisee's indemnification obligation applies regardless of whether a claim is reduced to judgment. The franchisee must indemnify Checkers, its affiliates, and their respective personnel against losses and expenses from any claim, demand, investigation, or formal or informal inquiry, irrespective of whether it results in a judgment. This indemnification extends to situations arising from a third-party claim connected to the franchisee's failure to perform the agreement, breach of warranty, or any unauthorized service or act.
The indemnification clause in the Checkers franchise agreement means that franchisees could be responsible for covering Checkers' losses and expenses even if a claim or inquiry doesn't end up in court or with a formal judgment against Checkers. This includes costs related to litigation, investigations, and settlements. The franchisee's responsibility to indemnify Checkers applies even if Checkers' negligence caused the loss, liability, or expense, either partially or entirely.
However, the Checkers franchisee is not responsible for liability arising from Checkers' breach of the agreement, gross negligence, or willful acts, unless joint liability is involved. In cases of joint liability, the indemnification extends to any finding of comparative or contributory negligence attributable to the franchisee. This means that if the franchisee and Checkers are both found negligent, the franchisee will still have to indemnify Checkers for the portion of negligence attributed to the franchisee.
This type of broad indemnification clause is relatively common in franchise agreements. Prospective Checkers franchisees should carefully review this section of the Franchise Agreement with a legal professional to fully understand the scope of their indemnification obligations and potential financial exposure. Understanding these obligations is crucial for assessing the risks associated with the franchise.