Under the Bonchon Franchise Agreement, what authority does a franchisee irrevocably grant regarding defense or settlement of trademark claims?
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, a franchisee irrevocably grants Bonchon the authority to defend or settle claims related to alleged infringement, unfair competition, or similar claims about the Proprietary Marks. This means that Bonchon has the right to manage any legal proceedings concerning the trademarks licensed to the franchisee. While the franchisee can participate in the defense at their own expense, Bonchon's decisions regarding the defense or settlement of these claims are final.
This provision is significant because it centralizes control over trademark-related legal matters with Bonchon. This is a common practice in franchising, as it ensures a consistent and coordinated defense of the brand's trademarks. Bonchon is obligated to indemnify the franchisee against third-party actions based solely on alleged infringement or unfair competition related to the Proprietary Marks, provided the franchisee has used the marks in accordance with the franchise agreement.
However, Bonchon has no obligation to defend or indemnify the franchisee if the claim arises from the franchisee's violation of the Franchise Agreement in their use of the Proprietary Marks. The franchisee is required to cooperate with Bonchon in the defense of any such claim. This arrangement protects Bonchon's brand and trademarks while offering some protection to the franchisee, as long as they adhere to the terms of the Franchise Agreement.
In practical terms, if a Bonchon franchisee faces a trademark infringement claim, they must promptly notify Bonchon, and Bonchon will take the lead in the defense or settlement. The franchisee must cooperate with Bonchon throughout the process, but Bonchon retains ultimate decision-making authority. This arrangement underscores the importance of franchisees adhering strictly to the guidelines for using Bonchon's Proprietary Marks as outlined in the Franchise Agreement.