Under what conditions will Alloy indemnify a franchisee against damages arising from the use of a trademark?
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, Alloy or its affiliate may defend a franchisee against third-party claims resulting from the franchisee's use of Alloy's trademarks. If Alloy or its affiliate determines that the franchisee has 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 has not used the trademarks in accordance with the franchise agreement, the franchisee will be responsible for the cost of the defense, including any judgment or settlement. In the event of litigation related to the use of trademarks, the franchisee must sign documents and perform necessary acts for the defense or prosecution, including becoming a nominal party to legal action. Alloy or its affiliate will reimburse the franchisee for out-of-pocket costs, unless the litigation results from the franchisee's trademark use inconsistent with the agreement.
This means that franchisees must adhere strictly to Alloy's guidelines and standards for trademark usage as outlined in the franchise agreement and manuals. Failure to do so could result in the franchisee being responsible for legal costs and damages in case of a trademark dispute. This conditionality is typical in franchising, as franchisors need to protect their brand and ensure consistent representation across all franchise locations. Prospective franchisees should carefully review the trademark usage guidelines and seek clarification on any ambiguous points before signing the franchise agreement.