What are the required actions a franchisee must take to be eligible for indemnification and reimbursement from Alloy regarding trademark-related claims?
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.
In the event of any litigation relating to your use of the Trademarks, you must sign any and all documents and do the acts as may, in our opinion, be necessary to carry out the defense or prosecution, including becoming a nominal party to any legal action, and we or our Affiliate will reimburse you for your out-of-pocket costs in doing these acts except if this litigation is the result of your use of the Trademarks in a manner inconsistent with the terms of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, if a third party brings a claim against an Alloy franchisee for trademark infringement, Alloy or its affiliate may defend the franchisee. If Alloy or its affiliate determines that the franchisee used the trademarks in accordance with the franchise agreement, 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 did not use the trademarks in accordance with the agreement, the franchisee will be responsible for these costs.
In the event of litigation related to the use of trademarks, the franchisee must sign all necessary documents and perform all actions that Alloy deems necessary for the defense or prosecution of the case, including becoming a nominal party to any legal action. Alloy or its affiliate will reimburse the franchisee for out-of-pocket costs incurred while taking these actions, unless the litigation results from the franchisee's use of the trademarks in a manner inconsistent with the terms of the agreement.
In practical terms, this means an Alloy franchisee must adhere strictly to the trademark usage guidelines outlined in the franchise agreement to be eligible for Alloy's defense and coverage of associated costs in case of a trademark-related claim. Failure to comply with these guidelines could result in the franchisee bearing the full financial burden of defending against such claims. It is important for prospective franchisees to carefully review and understand the trademark usage terms in the franchise agreement and seek clarification from Alloy on any ambiguous points before using the trademarks in their business operations.