Under what circumstances will Bonchon have no obligation to defend or indemnify a franchisee against a trademark claim?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the right to control any administrative proceedings or litigation involving a trademark licensed by us to you. If you learn of any claim against you for alleged infringement, unfair competition, or similar claims about the Proprietary Marks, you must promptly notify us. We will promptly take the action we consider necessary to defend you. We must indemnify you for any action against you by a third party based solely on alleged infringement, unfair competition, or similar claims about the Proprietary Marks. You may not settle or compromise any of these claims without our previous written consent. We will have the right to defend and settle any claim at our sole expense, using our own counsel. You must cooperate with us in the defense. Under the Franchise Agreement, you irrevocably grant us authority to defend or settle these claims. You may participate at your own expense, but our decisions with regard to the defense or settlement will be final. We will have no obligation to defend or indemnify you if the claim against you relates to your use of the Proprietary Marks in violation of the Franchise Agreement.
Source: Item 13 — TRADEMARKS (FDD pages 65–68)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon is responsible for defending and indemnifying franchisees against third-party claims of trademark infringement or unfair competition related to the use of Bonchon's Proprietary Marks. This means that if a franchisee is sued for using Bonchon's trademarks, Bonchon will cover the legal costs and any resulting damages, provided the franchisee has used the marks correctly. Bonchon retains control over any legal proceedings related to the trademarks and has the right to defend and settle claims as it sees fit, using its own counsel. The franchisee is required to cooperate in the defense but cannot settle any claims without Bonchon's written consent. The franchisee can participate in the defense at their own expense, but Bonchon's decisions are final. This arrangement is typical in franchising, as it protects the brand's trademarks and ensures consistent defense strategies.
However, Bonchon's obligation to defend and indemnify a franchisee is not absolute. Bonchon will have no obligation to defend or indemnify a franchisee if the claim against the franchisee relates to the franchisee's use of the Proprietary Marks in violation of the Franchise Agreement. This means that if a franchisee misuses the trademarks in a way that is not authorized by the agreement, Bonchon is not responsible for covering the franchisee's legal costs or damages.
This provision is important for prospective franchisees to understand. It highlights the need to adhere strictly to the guidelines and standards set forth in the Franchise Agreement regarding the use of Bonchon's trademarks. Failure to comply with these guidelines could result in the franchisee being solely responsible for any legal claims arising from trademark infringement or unfair competition. Therefore, franchisees must be diligent in following Bonchon's instructions and seeking clarification when needed to ensure proper use of the Proprietary Marks.