Is Gold Star liable for a Gold Star franchisee's incidental or consequential damages relating to an action involving the Marks?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 6.7 notwithstanding, if FRANCHISEE fails to meet its obligations under Sections 6.8 and 6.9 with respect to any particular event, the COMPANY's warranties and obligations under Sections 6.7 and 6.8 shall become void with respect to such particular event, and the COMPANY shall have no liability for costs incurred or damages awarded against FRANCHISEE. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 6.8, ABOVE, THE COMPANY SHALL NOT BE LIABLE TO FRANCHISEE FOR ANY DAMAGES, COSTS, OR EXPENSES WHATSOEVER, INCLUDING BUT NOT LIMITED TO, ANY LOSS OF PROFITS OR BUSINESS OPPORTUNITIES, OR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER RELATING TO ANY ACTION OR OTHER MATTER INVOLVING THE MARKS OR GOODWILL ASSOCIATED THEREWITH.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star is generally not liable to franchisees for damages, costs, or expenses related to actions involving the Marks or associated goodwill. This includes, but is not limited to, any loss of profits or business opportunities, or incidental or consequential damages of any kind. However, there is an exception as specifically outlined in Section 6.8 of the agreement.
Section 6.8 describes circumstances where a third party initiates legal action against the franchisee, challenging their right to use the Marks. In such cases, Gold Star may, at its discretion, assume the defense of the franchisee and indemnify them against infringement damages for which the franchisee is held liable, provided the franchisee meets certain conditions. These conditions include providing timely notice of the action, fully cooperating with Gold Star's counsel, and allowing Gold Star to retain ultimate control over the defense strategy.
However, if a Gold Star franchisee fails to meet their obligations under Sections 6.8 and 6.9 regarding a specific event, Gold Star's warranties and obligations under Sections 6.7 and 6.8 become void for that particular event. In this situation, Gold Star will not be liable for any costs incurred or damages awarded against the franchisee. This highlights the importance of franchisees adhering to the outlined procedures to ensure they can benefit from the protections Gold Star may provide in cases of infringement claims.