Regarding trademark infringement claims against a Bhc Master Franchisee, who has the authority to settle or compromise such claims?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
9.5 Mark Infringement Claims and Defense of Marks.
- (a) If Master Franchisee receives notice or otherwise becomes aware of any claim, suit or demand, threatened or pending, against Master 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 Master 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, Master Franchisee agrees to immediately notify Franchisor of such claim, suit, demand or misuse. Master 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 Master Franchisee agrees to cooperate fully in such matters.
- (b) Franchisor will indemnify Master Franchisee and hold Master Franchisee harmless from and against any and all judgments resulting from any claim, suit or demand arising from Master 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 Master 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) Master Franchisee hereby indemnifies Franchisor and holds Franchisor harmless from and against any and all judgments resulting from any claim, suit or demand arising from Master 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, the franchisor retains the authority to settle or compromise trademark infringement claims. Specifically, if a Master Franchisee faces a claim related to their use of Bhc's trademarks, they must immediately notify Bhc. The Master Franchisee cannot independently settle or compromise the claim without Bhc's written consent. Bhc will manage the defense, settlement, or compromise of the claim at its own discretion and expense, using attorneys it selects. The Master Franchisee is required to cooperate fully in these matters.
This arrangement protects Bhc's brand and trademarks by ensuring that all legal strategies and settlements are aligned with the company's overall interests. It also relieves the Master Franchisee of the burden of managing complex legal issues related to trademark infringement. However, the Master Franchisee must be proactive in reporting any potential claims to Bhc to ensure timely action.
Bhc will indemnify the Master Franchisee from judgments resulting from authorized use of the marks. However, the Master Franchisee indemnifies Bhc from any judgments resulting from unauthorized use of the marks. This clause highlights the importance of adhering to the franchise agreement and operational guidelines regarding the use of Bhc's trademarks and intellectual property. Unauthorized use could lead to significant legal liabilities for the Master Franchisee.
This is a fairly standard arrangement in franchising, as franchisors typically want to maintain control over their brand and protect it from infringement. Prospective franchisees should understand that while they have the right to use the trademarks, they must do so in accordance with the franchise agreement and that the franchisor has the final say in any legal matters related to the trademarks.