Does the Checkersrallys agreement require indemnification for losses and expenses incurred in connection with any formal inquiry?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
5.02 Indemnification.
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).
The term "losses and expenses" includes compensatory, exemplary, and punitive damages; fines and penalties; attorneys' fees; experts' fees; court costs; costs associated with investigating and defending against claims; settlement amounts; judgments; compensation for damages to our reputation and goodwill; and all other costs associated with any of the foregoing losses and expenses.
We agree to give you reasonable notice of any event of which we become aware for which indemnification may be required, and we may elect (but are not obligated) to direct the defense thereof, including appropriate counsel at our sole determination.
We may, in our reasonable discretion, take such actions as we deem necessary and appropriate to investigate, defend, or settle any event or take other remedial or corrective actions with respect thereto as may be necessary for the protection of indemnitees or Restaurants generally, provided however, that any settlement shall be subject to your consent, which consent shall not be unreasonably withheld or delayed.
Further, notwithstanding the foregoing, if the insurer on a policy or policies obtained in compliance with your Franchise Agreements agrees to undertake the defense of an event (an "Insured Event"), we agree not to exercise our right to select counsel to defend the event if such would cause your insurer to deny coverage.
We reserve the right to retain counsel to represent us with respect to an Insured Event at our sole cost and expense.
This Section shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of 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 requires franchisees to indemnify Checkersrallys and its affiliates. Specifically, franchisees must hold Checkersrallys harmless from losses and expenses incurred due to litigation, adjudicatory procedures, claims, demands, investigations, or formal or informal inquiries. This indemnification extends to situations arising from a third-party claim against Checkersrallys related to the franchisee's failure to perform the agreement, breach of representation or warranty, or any unauthorized service or act. This obligation exists regardless of whether the issue results from strict or vicarious liability imposed on Checkersrallys.
The term "losses and expenses" is broadly defined to include compensatory, exemplary, and punitive damages; fines and penalties; attorneys' fees; experts' fees; court costs; costs associated with investigating and defending against claims; settlement amounts; judgments; compensation for damages to Checkersrallys's reputation and goodwill; and all other associated costs. This means a Checkersrallys franchisee could be responsible for covering a wide range of costs incurred by Checkersrallys due to the franchisee's actions or inactions.
However, the indemnification requirement does not apply to liability arising from a breach of the agreement by Checkersrallys or the gross negligence or willful acts of Checkersrallys, except in cases of joint liability, where the franchisee's comparative or contributory negligence would still require indemnification. Checkersrallys is required to provide reasonable notice of any event that may require indemnification and may elect to direct the defense, including selecting counsel. While Checkersrallys may take actions to investigate, defend, or settle any event, any settlement is subject to the franchisee's consent, which cannot be unreasonably withheld or delayed.
This indemnification clause remains in effect even after the expiration or termination of the franchise agreement. Prospective franchisees should carefully consider the scope of this indemnification and consult with legal counsel to understand the potential financial implications. It is also important to understand what insurance coverage is required and how it interacts with these indemnification responsibilities.