Trademarks and Their Relationship to Franchises

Trademarks and Their Relationship to Franchises

A franchise is a commercial relationship between a franchisor and franchisee. In such relationships, franchisors share their knowledge and expertise with franchisees. They also provide franchisees with the right to use distinctive signs belonging to franchisors in order to facilitate franchisees’ commercial success. Among these distinctive signs are business logos, business concepts, and intellectual property such as trademarks. Trademarks are the most important form of intellectual property for all franchises; they play several important roles within any franchise.

Trademarks and the Franchisor/Franchisee Relationship

When a franchisor chooses to franchise a business, the franchisor provides the legal right to the use of any licensed trademarks to the franchisee. The franchisee in turn replicates the associated business model and will use the relevant trademarks when doing so. Franchisors have the right to instruct franchisees about how they will be allowed to use the trademarks. They should also inform franchisees about how to avoid infringement of intellectual property laws as they pertain to the trademarks. To seek further protection for a trademark, a franchisor should have this crucial form of intellectual property registered with the relevant intellectual property authorities. Doing so will also guard it from infringements of intellectual property rights by either competitors or franchisees.

Trademark Licenses and Franchises

In most cases, franchisors provide franchisees with a license that permits the use of the related trademark for business purposes. When such a license is granted, the franchisee gains access not only to the trademark, but also to any other intellectual property. Some of these other forms of intellectual property include associated business knowledge and processes. In exchange, the franchisee is to pay an initial start-up fee and licensing fees to the franchisor.

Although the issuance of a trademark license does not necessarily create a franchise, every franchise will possess a trademark license in some form. In addition, those who are not trying to create a franchise might inadvertently do so through the issuance of a trademark license if they are not careful. Therefore, anyone who plans to grant a trademark license to a third party should carefully consider if they intend to start a franchise, analyze the situation, and seek assistance from intellectual property experts before proceeding.

Trademark Licensing Agreements and Franchises

Every license related to a franchise must have an accompanying trademark licensing agreement. A trademark licensing agreement is to be registered with the relevant authorities before it can have any effect. All trademark licensing agreements are to state the terms and conditions between the franchisor and franchisee in order to ensure that the franchisor can remain in control of the associated intellectual property. The products and services for which the trademark is to be used must also be stated.

Although trademark licensing agreements share some features with franchising agreements, they can easily be differentiated because they relate to two different methods of conducting business activities. Franchising agreements require franchisors to disclose information about the business to franchisees; this is not a requirement of trademark licensing agreements. Furthermore, unlike most franchising agreements, most trademark licensing agreements may sometimes require licensees to fulfill sales quotas or performance criteria.

Protection of a Trademark in a Franchise

The cornerstone of any franchising contract is the franchisor’s right to use a trademark in the franchise. Thus, for legal reasons, it is imperative that a franchisor seeks proper intellectual property protection. This is because the franchisor is the creator of the trademark. By obtaining adequate intellectual property protection for a trademark, the franchisor can explicitly designate the products and services which can be used and marketed under that trademark.
To ensure a greater level of trademark protection, a franchisor might choose to consult a trademark agent who has much experience in the field of intellectual property. By working with these trademark agents, a franchisor can receive the necessary assistance and advice before, during, and after the process of obtaining intellectual property protection for the trademark. In addition, a trademark agent can accompany a franchisor in any procedure related to intellectual property matters. Franchisors can utilize many trademark services, with the assistance of these agents.

This article is brought to you by Exy Intellectual Property