If the Exit franchise agreement is governed by Minnesota law, what responsibility does the subfranchisor have regarding the franchisee's use of proprietary marks?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (E) MINNESOTA.
If this Agreement is governed by the laws of the State of Minnesota, then: (1) Section 16 will be amended to require that in the event Subfranchisor provides the Franchisee with written notice that Franchisee has breached this Agreement, such written notice will be provided to Franchisee at least ninety (90) days prior to the date this Agreement is terminated by the Subfranchisor, and Franchisee will have sixty (60) days after receipt of such written notice within which to correct the breach specified in the written notice; (2) notwithstanding any provision of this Agreement to the contrary, a court of competent jurisdiction will determine whether Subfranchisor will be required to post a bond or other security, and the amount of such bond or other security, in any injunctive proceeding commenced by Subfranchisor against Franchisee, Franchisee's shareholders or the partners or members, as the case may be; and (3) Subfranchisor will protect Franchisee's right to use the Proprietary Marks and/or indemnify Franchisee from any loss, costs or expenses arising out of any claim, suit or demand regarding use of the Proprietary Marks.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the franchise agreement is governed by Minnesota law, the subfranchisor has specific responsibilities regarding the franchisee's use of proprietary marks. The subfranchisor must protect the franchisee's right to use the proprietary marks. Additionally, the subfranchisor is required to indemnify the franchisee from any losses, costs, or expenses that arise from claims, suits, or demands related to the use of these proprietary marks. This means that if a franchisee faces legal challenges or incurs expenses due to their use of Exit's trademarks, the subfranchisor is obligated to cover those costs.
This provision offers significant protection to Exit franchisees operating in Minnesota. It ensures that the subfranchisor stands behind the brand and its trademarks, providing financial and legal support to the franchisee in case of disputes. This is particularly important because trademark disputes can be costly and time-consuming, potentially disrupting the franchisee's business operations. By including this clause, Exit aims to foster a supportive relationship between the subfranchisor and franchisee, reducing the franchisee's risk associated with using the brand's intellectual property.
For a prospective Exit franchisee in Minnesota, this clause represents a notable benefit. It provides assurance that the subfranchisor will actively defend the franchisee's right to use the Exit brand and will bear the financial burden of any legal challenges related to trademark usage. This can be a deciding factor for franchisees concerned about the potential liabilities associated with using a well-known brand. Franchisees should confirm that this clause is present and clearly defined in their franchise agreement before signing.
It is important for prospective franchisees to fully understand the scope of this indemnification. While the clause offers protection, franchisees should clarify with Exit what specific types of claims, suits, and demands are covered. Understanding the limitations and conditions of this protection is crucial for making an informed decision about investing in an Exit franchise in Minnesota.