In brief

Strong branding is critical for building a scalable franchise model and the most powerful tool in the franchise negotiation process. But, it is equally vital that the franchise’s Intellectual Property (IP) – brand and good will – are protected so that the franchisee is aware of the restraints under which the franchise trades and other competitors cannot replicate a trusted and sound model or product.

What you need to know

  • You need to register your company or business name as well its sub-names, taglines and unique business methods to protect yourself from the competition.
  • Registering your trademark will protect you from copycat competitors.
  • Put everything in writing! Legally bound franchise agreements will protect both the franchisor and franchisee from future legal complications.

If you are looking to franchise the brand you’ve worked so hard to build, here are three actions you can take to manage and protect it:

1.  Register your brand

Whilst the registration of a company or business name is important, no propriety rights are gained by that registration. It’s important to consider protecting all forms of IP and your unique business methods. Most importantly, get some professional advice about your branding to ensure your brand is registerable as a trade mark and then register it.  By registering your company or business name, you will increase its value and provide surety to a potential franchise as it will be the first thing they will look at when looking to invest. Registration is also an effective insurance for you as franchisor and will avoid the risk of your franchisee registering your trademark in their own name. In addition to the trading name, don’t forget to also consider registering any crucial sub-names or unique taglines which may be used in the course of trade and which are important to the overall image or value of the franchise.

2.  Enforce your rights

You must guard your business against copy cats. If you believe a competitor is running a similar business with a similar name nearby, there are range of options and actions you may be able to take. If you have a registered trademark, the Trade Marks Act 1995 (Cth) provides efficient and cost-effective protection for registered trademarks. In addition to a claim of infringement under the Trade Marks Act, you may also have an action at common law for passing off and/or an action under the Australian Consumer Law (ACL) for misleading and deceptive conduct. These claims are usually harder to establish as they require proof that your mark has developed a reputation in the marketplace, which is not required to be proven in a trademark infringement claim.

3.  Put it in writing

It’s essential for the franchisee to keep the franchisor’s trade secrets confidential. With this in mind, it’s strongly recommended that all parties in a franchise agreement sign a non-disclosure agreement before engaging in any franchise negotiations. A franchise agreement is also required to set out all IP rights including any patents, trademarks, registered designs, and the terms and conditions for use by franchisees. To avoid future conflicts with franchisees ensure that the franchise agreement clearly set out limitations on how your IP can be used.

Conclusion

Done correctly, franchising enables you to leverage the best characteristics of your business. With the right growth strategy and protection in place over the key assets, you can ensure the franchised brand’s long-term survival.

This article is intended as a source of information only. No reader should act on any matter without first obtaining professional advice. If you would like tailored advice regarding any intellectual property or franchising issues please contact one of our expert lawyers.

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