Summary
- Franchisors should register their trade marks before franchising to secure enforceable rights over their brand and prevent misuse by franchisees or third parties.
- A franchise agreement must include a trade mark licence with clear quality control provisions to avoid creating a bare licence, which can leave the mark vulnerable to cancellation.
- Franchisors should monitor franchisee use of their trade marks throughout the relationship and take action where standards are not met.
- This article is a plain-English guide to trade mark registration for franchised businesses operating in Australia, produced by LegalVision, a commercial law firm.
- LegalVision specialises in advising clients on intellectual property and franchising matters.
Tips for Businesses
Register your trade marks before franchising. Include a trade mark licence in your franchise agreement with explicit quality standards, audit rights, and consequences for non-compliance. Search the IP Australia trade mark database before applying. Select all relevant classes, including those covering planned future expansion. Renew registration every ten years.
If you are considering franchising your business, brand protection is vital. Franchising involves giving another party the right to use your business’ branding, systems, products, and services for a specified duration. To manage the franchisee’s use of your business’ branding, it is important that you have adequate legal protections in place. One way you can protect your business’ brand is by registering its trade marks. This article will explain why registering trade marks is important for franchised brands.
What is a Trade Mark?
A trade mark is a sign unique to a business. These can include a business’:
- name;
- logo; or
- slogan.
These essential elements form a brand’s identity and allow customers to recognise a particular business. Trade mark owners can protect their registered trade marks from use by other parties. Registration protects your brand’s reputation against dilution and misuse.
Why is Trade Mark Registration Important When Franchising?
The value of a business is often associated with your branding in the eyes of your customer base. The nature of franchising is to allow others to use your business’ systems, products and services. Many franchisors also license franchisees to use their branding, especially in business format franchising. Ultimately, as a franchisor, your brand is one of your most essential assets, and brand recognition plays a vital role in the success of your franchise network.
If you are a franchisor and a trade mark owner, you can protect your brand from misuse by other parties, including your franchisees. Registering your trade marks may also prevent ex-franchisees from misusing your branding and will allow you to seek legal recourse if they do.
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Brand Protection in the Franchise Agreement
In many franchise relationships, the franchisee obtains the rights to use the franchisor’s trade marks and branding when they sign the franchise agreement. In addition to registering their trade marks, franchisors should also have a well-crafted franchise agreement.
The agreement governs the franchisor-franchisee relationship. As a franchisor, you should:
- set out exactly how the franchisee can use your trade mark; and
- specify the franchisee’s rights to use it.
You should set explicit quality standards within your franchise agreement and detail these standards within your franchise operations manual. This way, franchisees should understand how they can and cannot use your branding. As the franchise agreement is a vital document, franchisors should seek legal assistance when drafting it to ensure robust brand protection.
Licensing Your Trade Mark in a Franchise Agreement
When you grant a franchisee the right to use your trade mark, you are effectively granting them a trade mark licence. This licence is typically contained within the franchise agreement itself rather than as a separate document. As a franchisor, it is important to understand how this licence works and what it must include to protect your trade mark registration.
To avoid this, your franchise agreement should include:
- explicit quality standards that franchisees must meet when using your trade mark;
- your right to inspect and audit franchisee operations; and
- clear consequences for franchisees who fail to meet those standards.
Robust quality control provisions protect both your trade mark registration and the reputation of your wider franchise network.
How to Register Your Franchised Brand’s Trade Mark
1. Conduct a Search
Before applying for a trade mark, you need to conduct a thorough search to check no other businesses are operating under your brand name or have registered your logo or slogan.
You should search the Intellectual Property Office’s (‘IPO’) trade mark database to see whether somebody else or another business has already registered it. If you find that a business owns the trade mark you wanted to register, you may have to stop using the trade mark. Otherwise, you could risk facing legal action for trade mark infringement.
2. Classify the Trade Mark
You will need to select relevant classes when applying to register your trade mark. Using the classification system, you will specify the types of goods and services you will use the trade mark for. There are many different classifications available. Select all that apply, including areas you plan for your franchised business’ trade marks to expand into.
3. Apply For Registration
Then, you will apply for your trade mark through the IPO. The application comes at a cost. The cost varies depending on the amount of classes you select. Nevertheless, registered trade marks remain protected for 10 years, with the option to renew the registration up to six months before expiration.
LegalVision’s Trade Mark Essentials Guide provides valuable information for any business looking to register or enforce a trade mark.
Key Takeaways
Franchisors should seek registration of their business’ trade marks. This is because your branding plays a crucial role in the success of your overall franchise network. Therefore, it is in your interests to ensure your brand recognition can continue to develop undisturbed and that you have clear avenues to pursue if your trade mark is misused.
You can protect your brand by registering your trade marks and including clear licensing terms in your franchise agreement. This should limit post-termination use of your marks and set quality standards for franchisees. Without adequate quality control, you risk creating a bare licence, leaving your trade mark vulnerable to cancellation.
If you need help protecting your franchised brand and registering trade marks, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced trade mark lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
What are the consequences of not registering my trade mark before franchising?
Without registration, your brand protection relies on the common law tort of passing off, which is harder and more expensive to enforce. A competitor or even a franchisee could potentially register a similar mark, leaving you in a weaker legal position. Registering before you begin franchising ensures you have clear, enforceable rights from the outset.
What is a trade mark licence and do I need one in my franchise agreement?
A trade mark licence is a formal permission granted by the trade mark owner to another party to use the mark. In a franchise context, the franchise agreement typically contains the licence, setting out the scope, duration, and conditions of use. Without clear licensing terms, the franchisor risks losing control over how their brand is used.
How long does trade mark protection last?
A registered trade mark is protected for ten years. You can renew it every ten years indefinitely, as long as you apply for renewal up to six months before the registration expires.
What happens if a franchisee breaches trade mark quality standards?
The franchisor can enforce the franchise agreement’s quality control provisions. Consequences may include termination of the franchise agreement or legal action for trade mark infringement, protecting both the mark and the network’s reputation.
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