Does Chesters have an obligation to participate in a franchisee's defense if they are involved in a proceeding involving a licensed Mark?
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, Chesters has no obligation to participate in a franchisee's defense if the franchisee is involved in an administrative or judicial proceeding involving a licensed mark. Furthermore, Chesters is not obligated to indemnify the franchisee for expenses or damages if the proceeding is resolved unfavorably toward the franchisee. However, the franchisee must cooperate with Chesters in defending or settling litigation.
This means that if a franchisee is sued for trademark infringement related to the use of Chesters's marks, Chesters is not contractually required to provide legal assistance or cover the franchisee's legal costs or any resulting damages. The franchisee bears the risk of defending themselves in such a situation, although they must cooperate with Chesters in the process.
This type of arrangement is not uncommon in franchising. Franchisors often retain control over trademark litigation but do not necessarily assume the responsibility for defending individual franchisees. Prospective franchisees should carefully consider this allocation of risk and may want to seek legal counsel to understand their potential exposure in the event of a trademark dispute.