Does the Chesters Agreement require the franchisor to protect the franchisee against claims of infringement or unfair competition?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
The Agreement does not require us to protect your right to use the Marks listed above or to protect you against claims of infringement or unfair competition from your use of the Marks. You have no contractual obligation to notify us of any apparent infringement or challenge to your use of any Mark or of any person's claim of any rights in any Mark. In all these cases, we have the right to take the action we deem appropriate (including no action). Because we own the Marks, we would expect to control exclusively any litigation, USPTO proceeding, or other administrative proceeding arising from any infringement, challenge, or claim. We have no obligation to participate in your defense and/or indemnify you for expenses or damages if you are a party to an administrative or judicial proceeding involving a Mark we license to you or if the proceeding is resolved unfavorably toward you. You must cooperate with us in defending or settling litigation. Our Agreement does not address our right to change the Marks during the franchise term.
Source: Item 13 — TRADEMARKS (FDD pages 31–33)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the franchise agreement does not require Chesters to protect franchisees from claims of infringement or unfair competition related to the use of its trademarks. This means that if a third party claims that a Chesters franchisee is infringing on their trademark or engaging in unfair competition, Chesters is not contractually obligated to defend the franchisee or cover any resulting expenses or damages. The franchisee bears the risk of such claims.
Furthermore, the FDD states that franchisees are not contractually obligated to notify Chesters of any potential infringement or challenges to the use of any mark. However, Chesters retains the right to take any action it deems appropriate, including no action at all. Chesters maintains exclusive control over any litigation, USPTO proceeding, or other administrative proceeding arising from any infringement, challenge, or claim because it owns the marks.
Chesters has no obligation to participate in a franchisee's defense or indemnify them for expenses or damages if the franchisee is involved in an administrative or judicial proceeding related to a licensed mark, especially if the proceeding is resolved unfavorably. However, the franchisee is required to cooperate with Chesters in defending or settling any litigation. This arrangement places the responsibility for defending against infringement claims primarily on the franchisee, with Chesters maintaining control over the legal strategy due to its ownership of the trademarks.
This is a significant risk factor for prospective Chesters franchisees. It is essential to conduct thorough due diligence and potentially seek legal counsel to understand the potential liabilities associated with trademark infringement or unfair competition claims. Franchisees should also inquire about any history of such claims against Chesters or its franchisees and the outcomes of those claims.