If a franchisee of Bhc becomes aware of a claim against them related to trademark infringement, what is the franchisee required to do?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
9.5 Mark Infringement Claims and Defense of Marks.
- (a) If Franchisee receives notice or otherwise becomes aware of any claim, suit or demand, threatened or pending, against Franchisee by any party other than Franchisor, the Owner of the Marks or any of Franchisor's affiliates on account of any alleged infringement, unfair competition or similar matter arising from Franchisee's use of the Marks in accordance with the terms of this Agreement, or any misuse of the Marks by third parties on the Internet or otherwise, Franchisee agrees to immediately notify Franchisor of such claim, suit, demand or misuse. Franchisee will have no power, right or authority to settle or compromise such claim, suit, or demand by a third party or to intervene to stop misuse, without Franchisor's prior written consent. Franchisor will defend, compromise, or settle at Franchisor's discretion any such claim, suit or demand and take steps to stop misuse at Franchisor's cost and expense, using attorneys selected by Franchisor or the Owner of the Marks, and Franchisee agrees to cooperate fully in such matters.
- (b) Franchisor will indemnify Franchisee and hold Franchisee harmless from and against any and all judgments resulting from any claim, suit or demand arising from Franchisee's authorized and use of the Marks or Franchisor's Intellectual Property in accordance with the terms of this Agreement. Franchisor has the sole discretion to determine whether a similar trademark or service mark that is being used by a third party is confusingly similar to the Marks or Franchisor's Intellectual Property being used by Franchisee or constitutes a misuse of the Marks or Franchisor's Intellectual Property, and whether and what subsequent action, if any, should be undertaken with respect to such similar trademark or service mark or misuse.
- (c) Franchisee hereby indemnifies Franchisor and holds Franchisor harmless from and against any and all judgments resulting from any claim, suit or demand arising from Franchisee's unauthorized and improper use of the Marks or Franchisor's Intellectual Property.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if a franchisee becomes aware of any claim, suit, or demand against them, other than from Bhc or its affiliates, related to alleged trademark infringement, unfair competition, or similar issues arising from the franchisee's use of Bhc's marks, the franchisee must immediately notify Bhc. This also applies to any misuse of the marks by third parties online or elsewhere. The franchisee is not authorized to settle or compromise such claims without Bhc's prior written consent.
Bhc retains the right to manage the defense, compromise, or settlement of any such claim at its own cost, using attorneys it selects. The franchisee is obligated to cooperate fully in these matters. This means a franchisee cannot independently decide how to handle a trademark infringement claim but must rely on Bhc's direction and expertise.
Bhc will indemnify the franchisee and hold them harmless from judgments resulting from claims arising from the franchisee's authorized use of Bhc's marks or intellectual property, as long as it aligns with the franchise agreement. However, the franchisee indemnifies Bhc against any judgments resulting from the franchisee's unauthorized or improper use of Bhc's marks or intellectual property. This clause highlights the importance of adhering to the franchise agreement and using the trademarks as authorized to ensure protection under the franchisor's indemnity.
This arrangement is typical in franchising, as the franchisor owns the trademarks and has a vested interest in protecting them. By centralizing control over trademark defense, Bhc aims to ensure consistent and strategic handling of infringement claims, which can protect the brand's reputation and value. Franchisees benefit from this arrangement by receiving legal support and indemnification for authorized trademark use, while also being held accountable for any unauthorized use.