Who benefits from the goodwill arising from the Burros Fries franchisee's use of the Names and Marks?
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 the 2024 Burros Fries Franchise Disclosure Document, Burros Fries benefits from the goodwill associated with the franchisee's use of the brand's Names and Marks. The agreement specifies that any goodwill that arises from a franchisee's operation of their Burros Fries business using the brand's trademarks and names accrues exclusively to the benefit of Burros Fries. This means that while franchisees build local recognition and customer loyalty, the value generated by the brand name ultimately belongs to the franchisor.
This arrangement has significant implications for franchisees, particularly upon the termination or expiration of their franchise agreement. The agreement explicitly states that no monetary amount will be assigned to the franchisee for any goodwill associated with their use of the Burros Fries system or Names and Marks. Therefore, when a franchise ends, the franchisee cannot claim or be compensated for the brand equity they helped build during their time operating the business. This is a common practice in franchising, as the brand and its associated trademarks are the intellectual property of the franchisor.
Burros Fries retains the right to modify or substitute its Names and Marks, and franchisees must comply with these changes at their own expense. This includes discontinuing or altering existing Names and Marks as directed by Burros Fries. The FDD also states that Burros Fries assumes no liability to the franchisee if such modifications are required, and the franchisee agrees not to make any claims related to these changes or any disputes regarding the Names and Marks. This underscores the franchisor's control over the brand's identity and the franchisee's obligation to adhere to the franchisor's decisions, even if it involves additional costs or potential business disruption.