Who benefits from the goodwill arising from a Burros Fries franchisee's use of the franchisor's copyrights?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees and acknowledges that:
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- As between the parties Franchisor has the right and interest in and to the Names and Marks and the goodwill associated with and symbolized by them;
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- The Names and Marks are valid and serve to identify the System and those who are franchised under the System;
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- Franchisee shall not directly or indirectly contest the validity or the ownership of the Names and Marks;
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- Franchisee's use of the Names and Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Names and Marks, except the non-exclusive Franchise granted herein;
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- Any goodwill arising from Franchisee's use of the Names and Marks in its Business under the System shall inure solely and exclusively to our benefit, and upon expiration or termination of this Agreement and the Franchise herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Names and Marks;
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- We reserve the right to substitute different Names and Marks for use in identifying the System, the Business and other Franchised Businesses operating there under;
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- Franchisee hereby agrees to comply, at Franchisee's expense, with any directions from us to discontinue, modify, substitute or add Names and Marks. We cannot and do not make any guaranty that a modification, discontinuance or otherwise will not be required for any reason. In such event, we have no liability to Franchisee. Franchisee agrees to make no claim in connection with any modification, discontinuance or other action, and/or with any dispute regarding the Names and Marks. There is always a possibility that there might be one or more businesses using a name and/or marks similar to us with superior rights;
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, any goodwill that results from a franchisee's use of Burros Fries's names and marks in their business exclusively benefits Burros & Fries Franchise, Inc. This means that while a franchisee's successful operation may increase brand recognition and value in their specific location, the monetary benefits of this increased goodwill do not accrue to the franchisee. Instead, the franchisor retains all rights to this goodwill.
This arrangement has significant implications for a prospective Burros Fries franchisee. Upon the expiration or termination of the Franchise Agreement, the franchisee will not be entitled to any compensation for the goodwill they helped create during the term of their franchise. This is a standard practice in franchising, as the brand and associated intellectual property are owned by the franchisor, not the individual franchisee.
Burros Fries retains the right to substitute different names and marks for use in identifying the System, the Business and other Franchised Businesses operating there under. The franchisee is obligated to comply with any directions from Burros Fries to discontinue, modify, substitute or add Names and Marks at the franchisee's expense. Burros Fries does not guarantee that modifications or discontinuance will not be required and has no liability to the franchisee in such an event. The franchisee agrees to make no claim in connection with any modification, discontinuance or other action, and/or with any dispute regarding the Names and Marks.
Therefore, while franchisees contribute to building the brand's reputation and goodwill through their daily operations, the financial benefits of that goodwill are reserved solely for Burros Fries. This is a crucial point for potential franchisees to understand, as it affects the long-term value and potential resale value of their franchise.