If an Azal Coffee franchisee chooses to participate in the defense or settlement of an intellectual property claim, who bears the expense?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
If we become aware of a claim against you on account of any alleged infringement, unfair competition, or similar matter relating to your use of our intellectual property, we may take action as we deem necessary and appropriate to protect and defend you against the claim by any third party. You must not settle or compromise any claim by a third party without our prior written consent. We will have the sole right to defend, compromise, or settle any claim, in our discretion,
using attorneys of our choosing, and you agree to cooperate fully with us in connection with the defense of the claim. You may participate at your own expense in the defense or settlement, but our decisions with regard to our intellectual property will be final. We do not have an obligation under the Franchise Agreement to participate in your defense or to indemnify you for expenses or damages in a proceeding involving our intellectual property licensed to you.
Source: Item 14 — PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION (FDD pages 39–41)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, if a claim is brought against a franchisee regarding the use of Azal Coffee's intellectual property, Azal Coffee has the right to take action to defend the franchisee. Azal Coffee has the sole right to defend, compromise, or settle any claim using attorneys of their choosing, and the franchisee must cooperate fully with Azal Coffee in the defense of the claim.
While Azal Coffee retains control over the defense or settlement of any intellectual property claim, the franchisee is permitted to participate in the defense or settlement. However, the FDD clearly states that if the franchisee chooses to participate, they must do so at their own expense. This means that Azal Coffee will not cover the franchisee's legal fees or other costs associated with their participation.
This arrangement is fairly typical in franchising. Franchisors want to maintain control over intellectual property litigation to ensure consistent brand protection and legal strategy. By allowing franchisees to participate at their own expense, Azal Coffee balances the franchisee's interest in their own defense with the franchisor's need for control. Franchisees should factor in potential legal expenses when assessing the overall costs and risks of investing in an Azal Coffee franchise.