What is a Carls franchisee required to do if litigation involving the Proprietary Marks is instituted or threatened against them?

According to Carls's 2024 Franchise Disclosure Document, if any litigation involving Carls's Proprietary Marks is instituted or threatened against a franchisee, the franchisee must immediately notify Carls in writing. Additionally, the franchisee is required to fully cooperate in defending or settling the litigation. The franchisee is prohibited from directly or indirectly contesting the validity or Carls's ownership of the Proprietary Marks.

This requirement ensures that Carls maintains control over the defense and management of its brand and trademarks. By mandating immediate notification and full cooperation, Carls can promptly assess the situation, strategize a defense, and protect its intellectual property rights. This is a common practice in franchising, as the franchisor typically owns the trademarks and needs to ensure consistent brand protection across all franchise locations.

The franchisee's obligation to cooperate in defending or settling the litigation means they may need to provide documentation, testify, or take other actions as directed by Carls. The prohibition against contesting the validity of Carls's trademarks reinforces the franchisee's agreement to uphold the brand's integrity and value. Failure to comply with these requirements could potentially lead to a breach of the franchise agreement and possible termination.

Prospective Carls franchisees should understand that they are not only obligated to use the Proprietary Marks in accordance with Carls's guidelines but also to actively support Carls in protecting those marks. This includes promptly reporting any potential infringements and fully cooperating in any legal proceedings. Franchisees should factor in potential legal costs and time commitments associated with such litigation when evaluating the Carls franchise opportunity.