Does the Alloy franchise agreement grant Alloy the right to defend the franchisee against third-party claims related to Trademark use?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
We or our Affiliate may defend you against any thirdparty claim, suit or demand arising out of your use of the Trademarks.
If we or our Affiliate determine that you have used the Trademarks in accordance with this Agreement, the cost of the defense, including the cost of any judgment or settlement, will be borne by us or our Affiliate.
If we or our Affiliate determine that you have not used the Trademarks in accordance with this Agreement, the cost of the defense, including the cost of any judgment or settlement, will be yours.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to the 2025 Alloy Franchise Disclosure Document, Alloy has the right, but not the obligation, to defend a franchisee against third-party claims arising from the franchisee's use of Alloy's trademarks. If Alloy determines that the franchisee has used the trademarks according to the franchise agreement, Alloy will bear the costs of the defense, including judgments or settlements. However, if Alloy determines the franchisee did not use the trademarks according to the agreement, the franchisee will be responsible for all defense costs, judgments, and settlements.
For franchisees in Minnesota, the FDD includes an addendum that modifies this provision. Specifically, Alloy states that it will undertake the defense of any claim of infringement by third parties involving the Alloy trademark for Minnesota franchisees. The franchisee is required to cooperate with Alloy in the defense, and any direct costs of such cooperation will be borne by Alloy.
This distinction highlights the importance of understanding the specific terms of the franchise agreement and any state-specific addenda. Prospective franchisees should ensure they fully understand their obligations regarding trademark usage and the potential financial implications of a trademark dispute. Franchisees should also confirm whether Alloy carries insurance to cover trademark defense costs.