Does the Checkersrallys agreement require the franchisee to indemnify the franchisor's Affiliates?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
10.04 Costs of Enforcement. If we file a claim in a judicial or arbitration proceeding for amounts you or any of your Owners owe us or any of our Affiliates, or if we enforce this Agreement in a judicial or arbitration proceeding, and we prevail in any such proceeding, you agree to reimburse us for all of our costs and expenses, including reasonable accounting, paralegal, expert witness and attorneys' fees. If we are required to engage legal counsel in connection with your failure to comply with this Agreement, you must reimburse us for any attorneys' fees, costs and expenses we incur.
10.10 Limitations on Damages. EXCEPT WITH RESPECT TO YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY CLAIMS UNDER SECTION 5.02, AND EXCEPT WITH RESPECT TO THE CONFIDENTIAL INFORMATION IN SECTION 6.01, 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 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the franchise agreement addresses indemnification in Section 5.02, requiring the franchisee to indemnify Checkersrallys for third-party claims. However, the document explicitly states an exception to the waiver of damages, noting that this waiver does not apply to the franchisee's obligation to indemnify Checkersrallys for third-party claims under Section 5.02.
Furthermore, Section 10.04 outlines that if Checkersrallys pursues legal action against a franchisee or their owners for amounts owed to Checkersrallys or its affiliates, and Checkersrallys prevails, the franchisee is responsible for reimbursing Checkersrallys for all associated costs and expenses, including accounting, paralegal, expert witness, and attorneys' fees. This suggests that while there is a general waiver of certain types of damages, the franchisee remains liable for specific financial obligations and legal costs under certain circumstances.
Additionally, Section 10.10 states, "EXCEPT WITH RESPECT TO YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY CLAIMS UNDER SECTION 5.02, AND EXCEPT WITH RESPECT TO THE CONFIDENTIAL INFORMATION IN SECTION 6.01, 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." This clause clarifies that the franchisee's indemnification obligation extends to third-party claims, indicating a specific scenario where the franchisee must protect Checkersrallys from potential liabilities.