Under what condition will Craters & Freighters indemnify and defend a franchisee against a third-party claim of infringement?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event that Franchisee becomes aware, receives notice, or is informed of any claim, suit, or demand against Franchisee on account of any alleged infringement, unfair competition, or similar matter relating to the use of the Marks or any trademarks, trade names, service marks, logotypes, insignia, or designs owned by Franchisor or represented by Franchisor and used by Franchisee in accordance with the terms and conditions of this Agreement, Franchisee will notify Franchisor in writing ("Infringement Notice") within three (3) calendar days of any such claim, suit, or demand.
Franchisee will not communicate with any persons other than Franchisor or Franchisor's legal counsel in connection with any such claim, suit, or demand.
Upon receiving the Infringement Notice from Franchisee, Franchisor will indemnify and defend Franchisee against any such claim by any third party, so long as such claim arose solely out of Franchisee's authorized use of the Marks licensed under this Agreement in connection with the operation of the Franchised Business.
Further, Franchisee acknowledges that Franchisor has the right to completely control the defense and, if appropriate, settlement negotiations and resolution regarding such claim, including the right to select legal counsel Franchisor deems appropriate.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, Craters & Freighters will indemnify and defend a franchisee against a third-party claim of infringement if the claim arises solely out of the franchisee's authorized use of the Marks licensed under the Franchise Agreement in connection with the operation of the Franchised Business. The franchisee must also notify Craters & Freighters in writing within three calendar days of any such claim, suit, or demand. The franchisee must not communicate with anyone other than Craters & Freighters or its legal counsel regarding the claim.
This means that if a third party claims that a Craters & Freighters franchisee is infringing on their trademark or other intellectual property rights through the use of Craters & Freighters' approved branding, Craters & Freighters will cover the franchisee's legal costs and any resulting damages, provided the franchisee has followed the terms of the agreement. This protection is a significant benefit for franchisees, as intellectual property litigation can be very expensive.
Craters & Freighters retains the right to completely control the defense, settlement negotiations, and resolution of any such claim, including the right to select legal counsel. This is a standard practice in franchising, as the franchisor has a vested interest in protecting its brand and ensuring a consistent legal strategy across all franchise locations. Franchisees must adhere to the franchisor's decisions in these matters.