Is Checkers liable for damages arising from the operation of the franchisee's Checkers business?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
18.10 Limitations on Damages. EXCEPT WITH RESPECT TO YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY CLAIMS UNDER SECTION 17.02, AND EXCEPT WITH RESPECT TO OBLIGATIONS REGARDING USE OF THE MARKS IN SECTION 5 AND THE CONFIDENTIAL INFORMATION IN SECTION 7.01, FRANCHISOR AND FRANCHISEE (AND ITS OWNERS) EACH WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER. YOU AND EACH OF YOUR OWNERS WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO RECOVER CONSEQUENTIAL, SPECIAL AND INCIDENTAL DAMAGES FOR ANY CLAIM DIRECTLY OR INDIRECTLY ARISING FROM OR RELATING TO THIS AGREEMENT.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers includes a clause limiting their liability for damages. Specifically, franchisees waive the right to recover consequential, special, and incidental damages from Checkers. However, this waiver does not apply to the franchisee's obligation to indemnify Checkers for third-party claims, obligations regarding the use of Checkers' marks, or obligations regarding confidential information.
In practical terms, this means that if a franchisee suffers indirect financial losses (consequential damages) or unexpected expenses (incidental damages) due to Checkers' actions, the franchisee generally cannot sue Checkers for those specific types of damages. An example of consequential damages might be lost profits due to a supply chain disruption caused by Checkers. An example of incidental damages might be the cost of renting temporary equipment because Checkers was late in delivering the correct equipment.
However, the franchisee remains responsible for covering Checkers' losses if a third party sues Checkers because of the franchisee's actions. Also, the franchisee is still liable for damages related to misuse of Checkers' trademarks or confidential information. This clause is intended to allocate risk between Checkers and its franchisees, with franchisees bearing responsibility for their own direct losses and actions, while Checkers protects itself from certain indirect or unforeseen financial liabilities stemming from the franchise operation.
It is important for prospective franchisees to understand the implications of this limitation on damages, as it can significantly affect their potential legal recourse against Checkers. Franchisees should consult with a legal professional to fully assess the risks and benefits before signing the franchise agreement.