Franchisors and Trade Marks
July 13, 2017
by Tom Phipps, Ashfords LLP
Brands are a key part of franchising. The brand the franchisor establishes is common to all franchisees and crucial to the entire franchise operation - it will be the main marketing tool to potential customers.
Franchisors therefore need to maintain control over it and, when necessary, have the ability to protect it, to ensure that value and reputation in it are not lost or damaged.
The franchise agreement itself is crucial, because a good contract will set out clearly what rights the franchisor and franchisee have to use and exploit the brand.
But beyond the franchise agreement, what else can a franchisor do to protect it?
A brand in legal terms is a trade mark. Trade marks can be unregistered or registered.
Unregistered Trade Marks
An unregistered trade mark is, essentially, established by a business building up goodwill in a name and/or logo, so that it is known by and associated with it. In turn, that goodwill can be enforced by a brand owner, by taking action against third parties who use a similar brand in order to pass themselves off as associated with the brand owner.
That all sounds straight-forward, but in order to enforce its rights, a franchisor must firstly prove that it has established that reputation and goodwill - this can be a difficult task and will involve compiling evidence of trading history. That 'hurdle' can delay and detract from the more important goal of actually protecting the mark and immediately restricting use of it by third parties.
Registered Trade Marks
A registered trade mark avoids all that. Once granted, it acts as standalone proof of that reputation and goodwill, and it will be infringed by anyone who uses the same brand for the same goods or services regardless of any "passing-off" issue. It will also be infringed by use of a similar brand as long as confusion among customers or potential customers can be proved.
Trade marks (words and devices) can be registered in a number of classes to cover the provision of certain classes of goods or services and the cost of registration is relatively modest.
Franchisors should register their brands where possible, both to maximise value and brand strength, to demonstrate a professional approach and to put them in the best position to protect them when needed. A small investment in registration makes the task of controlling (and where necessary enforcing) brand use much easier and the associated costs far lower.