From what losses and expenses must the Checkersrallys franchisee indemnify the indemnitees?
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.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, franchisees must indemnify the indemnitees (which include Checkersrallys, its affiliates, and their respective directors, officers, employees, shareholders, members, agents, successors, and assigns) from losses and expenses incurred due to third-party claims. These claims must arise directly or indirectly from specific events related to the franchisee's actions. These events include the franchisee's failure to perform or breach of any covenant, agreement, term, or provision of the Franchise Agreement, any breach of representation or warranty within the agreement, or any allegedly unauthorized service or act rendered in connection with the agreement.
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 costs associated with these losses and expenses. This means a franchisee could be responsible for covering a wide range of costs if a third-party claim arises from their actions or inactions related to the franchise agreement.
However, the indemnification requirement has some limitations. Checkersrallys's negligence causing the loss, liability, or expense does not negate the franchisee's duty to indemnify, except in cases of Checkersrallys's breach of the agreement, gross negligence, or willful acts. In cases of joint liability, the franchisee's indemnification extends to any comparative or contributory negligence attributed to them. Checkersrallys agrees to provide reasonable notice of any event that may require indemnification and may elect to direct the defense, including selecting counsel.
This indemnification clause is a standard practice in franchising, designed to protect the franchisor from liabilities arising from the franchisee's operation of the business. Prospective Checkersrallys franchisees should carefully consider the scope of this indemnification and ensure they have adequate insurance coverage and business practices in place to minimize the risk of third-party claims. They should also seek legal counsel to fully understand their obligations under this clause.