Does Buns On Fire have the obligation to defend claims arising from a franchisee's securities offering?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
If, during the term of this Agreement, there is a claim of prior use of the "Buns on Fire" name or any other of the Marks in the area in which Franchisee is doing business or in another area or areas, Franchisee shall so use any of Franchisor's other Marks in such a way and at Franchisor's discretion in order to avoid a continuing conflict.
3.16 Indemnification by Franchisor
The Franchisor agrees to indemnify Franchisee against, and to reimburse Franchisee for, all direct damages, excluding consequential, punitive, or special damages, for which Franchisee is held liable in any proceeding in which Franchisee's use of any Mark pursuant to and in compliance with this Agreement is held to constitute trademark infringement, unfair competition or dilution, and for all costs reasonably
incurred by Franchisee in the defense of any such claim brought against him or in any such proceedings in which he is named as a party, provided that Franchisee has timely notified the Franchisor of such claim or proceedings, has otherwise complied with this Agreement and has tendered complete control of the defense of such to the Franchisor. If the Franchisor defends such claims, the Franchisor shall have no obligation to indemnify or reimburse Franchisee with respect to any fees or disbursements of any attorney retained by Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Buns On Fire's obligation to defend claims against franchisees is limited to specific circumstances. According to section 3.16, Buns On Fire will indemnify franchisees against direct damages, excluding consequential, punitive, or special damages, if the franchisee is held liable for trademark infringement, unfair competition, or dilution related to their use of the Buns On Fire marks, provided the franchisee complied with the agreement, notified Buns On Fire promptly, and surrendered control of the defense to Buns On Fire. If Buns On Fire assumes the defense, they are not obligated to cover attorney fees incurred by the franchisee.
However, the FDD does not explicitly address whether Buns On Fire is obligated to defend claims arising from a franchisee's securities offering. The franchise agreement outlines scenarios where Buns On Fire will provide indemnification related to the use of its trademarks, but it does not extend this obligation to cover potential liabilities from the franchisee's own financial activities or securities offerings.
Therefore, a prospective Buns On Fire franchisee should seek clarification from the franchisor regarding their responsibilities and potential liabilities related to securities offerings. It would be prudent to consult with a legal professional to understand the full scope of indemnification and defense obligations, especially concerning activities outside the standard operation of the franchised business.