Are All States M.E.D. franchisees required to indemnify the franchisor for infringement of any Mark?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
21.3 Indemnification
Franchisee shall hold harmless and indemnify Franchisor, any Affiliate, all holders of a legal or beneficial interest in Franchisor and all officers, directors, executives, managers, members, partners, owners, employees, agents, successors and assigns (collectively "Franchisor Indemnities") from and against all losses, damages, fines, costs, expenses or liability (including reasonable attorneys' fees and all other costs of litigation) incurred in connection with any action, suit, demand, claim, investigation or proceeding, or any settlement thereof, which arises from or is based upon Franchisee's (a) ownership or operation of the Franchised Business; (b) violation, breach or asserted violation or breach of any federal, state or local law, regulation or rule; (c) breach of any representation, warranty, covenant, or provision of this Agreement or any other agreement between Franchisee and Franchisor (or an Affiliate); (d) defamation of Franchisor or the System; (e) acts, errors or omissions committed or incurred in connection with the Franchised Business; or (f) infringement, violation or alleged infringement or violation of any Mark, patent or copyright or any misuse of the Trade Secrets or other Confidential Information. The obligations of this Section 21.3 shall expressly survive the termination of this Agreement.
21.4 Right to Retain Counsel
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, franchisees are required to indemnify the franchisor for losses, damages, fines, costs, expenses, or liability (including reasonable attorneys' fees and all other costs of litigation) resulting from any action, suit, demand, claim, investigation or proceeding, or any settlement thereof, which arises from or is based upon the franchisee's infringement, violation or alleged infringement or violation of any Mark. This obligation survives the termination of the Franchise Agreement. This means that if a franchisee's use of the All States M.E.D. marks leads to a legal claim against the franchisor, the franchisee is responsible for covering the franchisor's associated costs.
In addition, the Minnesota Addendum to the Franchise Agreement states that the franchisor will protect the franchisee's rights to use the trademarks, service marks, trade names, logotypes or other commercial symbols or indemnify the franchisee from any loss, costs or expenses arising out of any claim, suit or demand regarding the use of the name.
This indemnification clause is a significant point for prospective franchisees. It means that if a franchisee's actions infringe on someone else's trademark rights, the franchisee, not All States M.E.D., will bear the financial burden of defending against any claims. Franchisees should ensure they fully understand the scope of permitted mark usage and conduct thorough due diligence to avoid potential infringement issues. It is also important to note that All States M.E.D. is not required to participate in the franchisee's defense or indemnify them for expenses or damages if the franchisee is involved in a trademark dispute.