Under what circumstances does the limitation on damages not apply to Checkersrallys franchisees?
Checkersrallys 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 Checkersrallys's 2025 Franchise Disclosure Document, there are specific instances where the limitation on damages does not apply to franchisees. The waiver of rights to punitive, exemplary, consequential, special, and incidental damages does not extend to the franchisee's obligation to indemnify Checkersrallys for third-party claims as described in Section 17.02 of the franchise agreement. Additionally, the limitations on damages do not apply to obligations regarding the use of Checkersrallys's trademarks as detailed in Section 5, or the use of confidential information as outlined in Section 7.01 of the franchise agreement.
This means that while Checkersrallys franchisees generally waive their rights to seek certain types of damages from the franchisor, these waivers have defined boundaries. Franchisees remain responsible for covering Checkersrallys's losses resulting from third-party claims if the franchisee is obligated to indemnify Checkersrallys. They are also accountable for damages related to misuse of Checkersrallys's trademarks or unauthorized disclosure of confidential information.
This clause is fairly typical in franchise agreements, as it seeks to balance the franchisor's need to protect its brand and system with the franchisee's need for fair treatment. Prospective franchisees should carefully review these sections (5, 7.01, and 17.02) to fully understand the scope of these exceptions and their potential financial exposure. Understanding these exceptions is crucial for assessing the risks and responsibilities associated with operating a Checkersrallys franchise.