Trademarks and franchise agreements go hand in hand. This post discusses why and shows how trademark registration serves to protect both the franchisor and the franchisee.
Franchising is a business arrangement where a person or entity (The Franchisee) pays for the rights to use another business’ (The Franchisor) trademarks to market a product or service. The agreement will usually include other basics of the franchisor’s system of business such as employee training, recipes, layout, etc. Fast food restaurants may be the most well-known form of franchising, but all sorts of growing business sectors have benefited from franchise arrangements. Franchising is beneficial to the franchisee because it provides an opportunity to operate an already established business. And as stated above, it is beneficial to the franchisor as a way to earn passive income and expand your brand into new markets.
The primary legal right that is granted to a franchisee in a franchise agreement is the right to use the franchisor’s trademarks. While the “system of business” is important, it is the ability to use a franchisor’s trademarks in marketing the business that is the most valuable part of the agreement. Franchisors should be detailed in informing the franchisee how they can and cannot use the franchisor’s trademarks.
Franchisors should also be diligent in monitoring the franchisee’s use of the trademarks and be prepared to take action if the franchisee violates the terms of the agreement or otherwise misuses the franchisor’s trademarks. Trademark registration with the USPTO provides the mark owner with the strongest legal tools available to protect their trademarks, making it an important initial step when starting a business and certainly when exploring the possibility of franchising your business.
Please feel free to Contact Alex to discuss the post or to get started on registering your trademarks.