If a Bhc franchisee misuses the Bhc marks, who is responsible for covering judgments resulting from claims?
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, a franchisee is responsible for covering judgments resulting from claims if they have made unauthorized and improper use of Bhc's marks or intellectual property. Specifically, the franchisee must indemnify Bhc and hold Bhc harmless from any judgments arising from such claims. This means the franchisee is responsible for all costs associated with defending against and settling claims resulting from their misuse of Bhc's trademarks.
Conversely, Bhc will indemnify the franchisee and hold them harmless from judgments resulting from claims arising from the franchisee's authorized use of the marks and Bhc's intellectual property, provided the franchisee is operating within the terms of the franchise agreement. Bhc has the discretion to determine if a third party's trademark is confusingly similar to Bhc's and what action should be taken.
This allocation of responsibility is typical in franchising. Franchisees are expected to adhere strictly to the brand standards and approved uses of trademarks. Franchisors like Bhc must protect their brand identity, and franchisees bear the risk of misusing the brand. Franchisees should ensure they fully understand the permitted uses of Bhc's marks and intellectual property to avoid potential liability.