Regarding infringement claims against a Bhc franchisee, does the franchisee have the authority to settle or compromise without Franchisor's consent?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Trade Dress, Operations Manual and Franchisor's other manuals, bulletins, instruction sheets, forms, methods of operation and goodwill are and, as between Master Franchisee and Franchisor, remain vested solely in Franchisor, and the use thereof is only co-extensive with the term of this Agreement.
- (c) Master Franchisee agrees that during the term of the Franchise, and after any assignment, expiration or termination of the Franchise, Master Franchisee will not, directly or indirectly, commit an act of infringement or contest or aid others in contesting the validity, distinctiveness, secondary meaning, ownership or enforceability of the Marks or Intellectual Property, or take any other action in derogation of the Marks or Intellectual Property, and that no monetary amount will be assigned as attributable to any goodwill associated with Master Franchisee's use of the System, the Marks or Intellectual Property.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Master Franchisee is restricted from settling or compromising infringement claims related to Bhc's intellectual property without the franchisor's explicit consent. The agreement emphasizes that all rights to use the Marks and Intellectual Property within the franchised System are Bhc's exclusive property. The Master Franchisee cannot take any action that undermines Bhc's Marks or Intellectual Property.
Specifically, the Master Franchisee agrees not to contest the validity, distinctiveness, ownership, or enforceability of the Marks or Intellectual Property, nor can they take any action that could harm these assets. This extends to any period during the franchise term and even after the agreement expires or is terminated. This restriction ensures that Bhc maintains complete control over its brand and intellectual property, preventing any unauthorized use or challenges to its rights.
Furthermore, the Master Franchisee is obligated to ensure that their subfranchisees also adhere to these restrictions. This means that the Master Franchisee must actively prevent subfranchisees from engaging in any activities that could infringe upon Bhc's intellectual property rights. This obligation underscores the importance of protecting Bhc's brand and intellectual property across the entire franchise network.
This provision is typical in franchising, as franchisors need to protect their trademarks and brand identity. By requiring franchisees to obtain consent before settling infringement claims, Bhc maintains control over its brand and ensures consistent enforcement of its intellectual property rights. This protects the overall value and reputation of the Bhc brand.