If Alloy defends an Alloy franchisee against a third-party claim, who bears the cost of the defense?

According to Alloy's 2025 Franchise Disclosure Document, the cost of defending a franchisee against a third-party claim arising from the use of Alloy's trademarks depends on whether the franchisee used the trademarks in accordance with the franchise agreement. If Alloy or its affiliate determines that the franchisee has used the trademarks correctly, Alloy or its affiliate will bear the cost of the defense, including any judgment or settlement costs.

However, if Alloy or its affiliate determines that the franchisee has not used the trademarks in accordance with the agreement, the franchisee will be responsible for the cost of the defense, including any judgment or settlement costs. This conditionality places a significant responsibility on the franchisee to adhere strictly to Alloy's trademark usage guidelines.

For franchisees in Minnesota, there is an addendum that modifies this condition. According to the addendum, Alloy will undertake the defense of any claim of infringement by third parties involving the ALLOY Trademark. The franchisee will cooperate with the defense in any reasonable manner prescribed by Alloy, with any direct cost of such cooperation to be borne by Alloy. This addendum provides more protection for Minnesota franchisees regarding trademark infringement claims.