Under what circumstances is the Gold Star franchisee NOT required to indemnify the company?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
T 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.**
6.11 Notice to the Public. FRANCHISEE will identify itself to the public as the owner of the Store in at least one conspicuous location in the Store and in any other documentation that the COMPANY may reasonably specify. FRANCHISEE will not use the Marks or the System to incur any obligation or indebtedness on behalf of the COMPANY, or in connection with any activity that may harm, tarnish or impair the COMPANY's reputation, name, service, Marks or System. The COMPANY assumes no liability to FRANCHISEE or any third party with respect to the quality of any materials, supplies, food items, sauces, or services or any other items provided or promoted by the COMPANY and as distributed or provided by FRANCHISEE under the name GOLD STAR CHILI or any other Mark, and FRANCHISEE will indemnify, hold harmless and insure the COMPANY against any liability, loss or expense (including reasonable attorney fees) arising out of FRANCHISEE's use of the Marks or the System.
7. PURCHASE OF INGREDIENTS, SUPPLIES AND MATERIALS.
- 7.1 Proprietary Products.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee is generally required to indemnify, hold harmless, and insure Gold Star against any liability, loss, or expense (including reasonable attorney fees) arising out of the franchisee's use of the Marks or the System. However, there is an exception outlined in Section 6.8 of the agreement. The document states that the company shall not be liable to the 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, except as specifically set forth in Section 6.8.
In practical terms, this means that while a Gold Star franchisee is typically responsible for protecting the company from liabilities stemming from their operations and use of the Gold Star system and trademarks, there are specific circumstances where this requirement does not apply. The primary exception is detailed in Section 6.8, which likely outlines situations where Gold Star itself is responsible for certain liabilities or damages. The FDD excerpt does not provide the details of Section 6.8.
This arrangement is fairly standard in franchising, where franchisees usually bear responsibility for their day-to-day operations and brand usage, while the franchisor retains responsibility for certain overarching aspects. A prospective franchisee should carefully review Section 6.8 of the franchise agreement to fully understand the scope of their indemnification obligations and the exceptions to this rule. Understanding these exceptions is crucial for assessing the potential financial risks and liabilities associated with operating a Gold Star franchise.