Who bears the direct costs of the franchisee's cooperation with Alloy in defending against a third-party claim of trademark infringement involving the ALLOY Trademark?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ADDENDUM TO THE FRANCHISE AGREEMENT REQUIRED FOR MINNESOTA FRANCHISEES
This Addendum pertains to franchises sold in the State of Minnesota and is for the purpose of complying with Minnesota statutes and regulations. Notwithstanding anything which may be contained in the body of the Franchise Agreement to the contrary, the Agreement is amended as follows:
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- We will undertake the defense of any claim of infringement by third parties involving the ALLOY Trademark, and you will cooperate with the defense in any reasonable manner prescribed by us with any direct cost of such cooperation to be borne by us.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the party responsible for covering the direct costs associated with a franchisee's cooperation in defending against a third-party claim of trademark infringement involving the ALLOY Trademark depends on the location of the franchise. For franchises sold in Minnesota, Alloy will bear the direct costs of the franchisee's cooperation. This means that if a franchisee in Minnesota is required to assist Alloy in defending against a trademark infringement claim, Alloy will cover the direct expenses incurred by the franchisee during this process. This provision is specific to Minnesota franchisees and is included as an addendum to the franchise agreement to comply with Minnesota statutes and regulations.
For franchisees located outside of Minnesota, the FDD does not explicitly state who bears the direct costs of cooperation in defending against trademark infringement claims. However, the FDD does state that Alloy or its affiliate has the sole right to direct and control any administrative proceeding or litigation involving the Trademarks, including any settlement. It also states that the franchisee must sign any and all documents and do the acts as may, in Alloy's opinion, be necessary to carry out the defense or prosecution, including becoming a nominal party to any legal action. Alloy or its affiliate will reimburse the franchisee for out-of-pocket costs in doing these acts except if this litigation is the result of the franchisee's use of the Trademarks in a manner inconsistent with the terms of this Agreement.
Therefore, for locations outside of Minnesota, while Alloy covers defense costs if the franchisee used the trademarks correctly, the document does not specify who covers the direct costs of the franchisee's cooperation. Prospective franchisees outside of Minnesota should seek clarification from Alloy regarding responsibility for these costs to fully understand their potential financial obligations. This is a crucial point for franchisees to clarify, as these costs can potentially be significant and impact their profitability.