Who will defend an Exit franchisee for claims by a third party concerning the franchisee's use of Proprietary Information?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is named as a defendant or party in any action involving the Proprietary Marks or System and if Franchisee is named as a defendant or party solely because the plaintiff or claimant is alleging that Franchisee does not have the right to use the Proprietary Marks or System, then Franchisee shall tender the defense of the action to Subfranchisor and Subfranchisor or EXIT will defend Franchisee in the action provided Franchisee has tendered the action to Subfranchisor within seven (7) days after receiving service of the pleadings or the Summons and Complaint involving the action.
Source: Item 14 — PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION (FDD page 27)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee is named in an action involving the Proprietary Marks or System because a claimant alleges the franchisee lacks the right to use them, the franchisee must tender the defense of the action to the Subfranchisor. Then, the Subfranchisor or Exit will defend the franchisee in the action.
However, this defense is conditional. The franchisee must tender the action to the Subfranchisor within seven days of receiving service of the pleadings or the Summons and Complaint related to the action. This strict timeline highlights the importance of promptly notifying the Subfranchisor of any potential legal issues related to the use of Exit's Proprietary Marks or System.
This arrangement is typical in franchising, where franchisors often retain control over the defense of their trademarks and systems. By retaining control, Exit can ensure a consistent legal strategy and protect the overall brand. Franchisees benefit from this arrangement by receiving legal support from the franchisor, who has a vested interest in protecting the brand's intellectual property.