At its core, franchising involves the transfer of the right to sell a product trademarked by the franchisor. This contractual arrangement empowers individuals and groups with the authority to market a trademarked product or service using the recognizable logo of the business. Consequently, many entrepreneurs choose to launch their ventures under the umbrella of well-established brands, leveraging the widespread recognition and trust associated with these trademarks.
Notable examples of franchises abound in the fast-food industry, with global giants like McDonald’s, Burger King, and Domino’s leading the way. According to Franchise Direct, a significant majority—90%—of Burger King branches are independently owned by franchisees. Similarly, around 93% of McDonald’s outlets are operated by independent local business owners, showcasing the pervasive influence of franchising.
The first legal right a franchisor extends to franchisees is the authorized use of their trademark. Franchisees are required to prominently feature the franchisor’s logos and trademarks in the marketplace while offering products or services under the brand name. To fortify the protection of the franchise trademark, Trademark Registration plays a pivotal role. This registration is not merely a formality; it aligns with the franchise’s core theme, safeguarding its trade name and enhancing the business’s authority through robust protection.
While the trademark registration process may vary across countries, its overarching objective remains consistent—to confer rights upon the owner rather than merely describe them. The jurisdiction where the trademark owner intends to file must be carefully considered, and the application can be submitted by a representative appointed by the owner.
To maintain brand control, protect intellectual property, and ensure consistency, franchisors often resort to Franchise Contracts. These contracts serve as a bulwark, shielding the business model, intellectual property rights, and the franchise brand from deception or misuse. In line with this, the Federal Trade Commission has compiled a Franchise Rule Compliance Guide to aid franchisors in adhering to the modified franchise rule.
Beyond franchising, another avenue for leveraging trademarks is through licensing—a legal relationship with a narrower scope of activities compared to franchising. Licensing extends permission to third parties for the use of a trademark, patent, or technology. Alternatively, trademark owners may opt for assignment to transfer trademark rights. However, it is paramount to prevent any registered user or licensee from diminishing the brand value, as a trademark is intricately linked to the goodwill and reputation of the brand it represents.
Section 49 of the Act holds significance in this context, emphasizing the need for a written agreement that specifies how the licensee and licensor intend to address quality assurance. It underscores that the use of the proprietor’s trademark by the licensee must align with the buyer’s perception, ensuring that the brand maintains its integrity and association with the rightful owner.
