Does the Checkersrallys indemnification requirement apply to a breach of any representation or warranty in the agreement?
Checkersrallys 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).
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 franchisee's indemnification obligations extend to breaches of representations and warranties contained in the franchise agreement. Specifically, the franchisee must indemnify Checkersrallys, its affiliates, and their respective personnel against losses and expenses arising from third-party claims connected to the franchisee's breach of any representation or warranty within the agreement. This means that if a third party brings a claim against Checkersrallys due to something the franchisee misrepresented or warranted, the franchisee is responsible for covering Checkersrallys's associated losses and expenses.
The indemnification extends to losses and expenses incurred in connection with any litigation, claim, demand, investigation, or inquiry, regardless of whether it results in a judgment. This broad coverage means that Checkersrallys is protected from a wide range of potential liabilities stemming from the franchisee's actions or misrepresentations. The definition of "losses and expenses" is comprehensive, including damages, fines, attorney's fees, and costs related to investigating and defending against claims, as well as compensation for damage to Checkersrallys's reputation and goodwill.
However, the indemnification does not apply to liabilities arising from Checkersrallys's own breach of the agreement or from the gross negligence or willful acts of Checkersrallys, unless joint liability is involved. In cases of joint liability, the franchisee's indemnification obligation will extend to any finding of comparative or contributory negligence attributable to the franchisee. Checkersrallys agrees to provide reasonable notice of any event that may require indemnification and may elect to direct the defense of such event, including selecting counsel.
This indemnification clause is a significant consideration for prospective Checkersrallys franchisees. It highlights the importance of understanding and adhering to all representations and warranties made in the franchise agreement. Franchisees should be aware that they could be held financially responsible for a wide range of claims and expenses if they breach any of these representations or warranties. It is also important to note that this section remains in effect even after the franchise agreement expires or is terminated.