How to Take the IP Risks out of Franchising

IP risks of franchising

IP risks of franchising

Franchising has many benefits for both parties: franchisee and franchisor. There are also significant risks unless Intellectual Property issues are sorted out professionally from day one.

Franchising is a popular way to scale a business without a significant investment in premises, equipment or employees. It’s also a convenient way for many people to run their own business without having to come up with novel ideas, products or marketing collateral.

Franchisors have to remember that they are entrusting their brand, ideas, content and products to third parties. They are also entrusting them with their future livelihood.

Without easily understood agreements about where and how assets such as Trade Marks and marketing collateral can be used there’s a genuine risk of the brand being undermined. And if you don’t have clear Trade Mark and Copyright protection it’s hard to control anything.

Protecting your knowledge and ideas

Knowledge based franchises such as training or marketing have particular issues to manage. You need to be confident that legal and contractual protection minimises the chances of the intellectual capital, particularly your copyright in your slides, literature and training materials, from leaking out into the public domain without your knowledge – and without you getting the credit or financial compensation to which you may be entitled.

Protection for franchisees

Somebody buying a franchise will want the confidence that Intellectual Property rights are protected. If the franchisor hasn’t put the necessary protection in place, the business they have invested in is at risk of imitation or or somebody passing themselves off as the same business. Franchisees may have bought an empty shell rather than a business with a viable future.

Franchisees need the confidence that:

  • They can use any unregistered Trade Marks licensed to them without the risk of infringing any third party rights.
  • Trade Marks are maintained and protected and that all fees have been paid.
  • The franchisor hasn’t registered, or agrees not to use, any similar Trade Marks in a way that could undermine the franchisee’s business.

It’s likely that the value of a franchise will be affected by the professionalism (or otherwise) of the IP protection put in place by the franchisor.

If the business involves selling physical products the protection needed could include Design rights or Patent protection as well as Trade Marks and Copyright.

How IP problems arise

Problems arise when businesses don’t think through the Intellectual Property issues before expanding the franchise network. Once everything is in the public domain it’s a tough job to pull back control, even assuming that may be possible.

The other commonly neglected aspect is any Intellectual Property or know-how that comes into existence during the contract. Again, clarify the rules beforehand and you should avoid problems, disputes and any other IP risks of franchising.

Usually it isn’t difficult to put the exact protection you need into place. But always get professional advice before you start promoting the franchise opportunities or check the arrangements before you buy a franchise.

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