In brief: Strong branding is critical for
building a scalable franchise model and the most powerful tool in
the franchise negotiation process. But, it is equally vital that
the franchise's Intellectual Property (IP) – brand and
good will – are protected so that the franchisee is aware of
the restraints under which the franchise trades and other
competitors cannot replicate a trusted and sound model or
What you need to know:
You need to register your company or business name as well its
sub-names, taglines and unique business methods to protect yourself
from the competition.
Registering your trademark will protect you from copycat
Put everything in writing! Legally bound franchise agreements
will protect both the franchisor and franchisee from future legal
If you are looking to franchise the brand you've worked so
hard to build, here are three actions you can take to manage and
Register your brand: Whilst the registration
of a company or business name is important, no propriety rights are
gained by that registration. It's important to consider
protecting all forms of IP and your unique business methods. Most
importantly, get some professional advice about your branding to
ensure your brand is registerable as a trade mark and then register
it. By registering your company or business name, you will increase
its value and provide surety to a potential franchise as it will be
the first thing they will look at when looking to invest.
Registration is also an effective insurance for you as franchisor
and will avoid the risk of your franchisee registering your
trademark in their own name. In addition to the trading name,
don't forget to also consider registering any crucial sub-names
or unique taglines which may be used in the course of trade and
which are important to the overall image or value of the
Enforce your rights: You must guard your
business against copy cats. If you believe a competitor is running
a similar business with a similar name nearby, there are range of
options and actions you may be able to take. If you have a
registered trademark, the Trade Marks Act 1995 (Cth) provides
efficient and cost-effective protection for registered trademarks.
In addition to a claim of infringement under the Trade Marks Act,
you may also have an action at common law for passing off and/or an
action under the Australian Consumer Law (ACL) for misleading and
deceptive conduct. These claims are usually harder to establish as
they require proof that your mark has developed a reputation in the
marketplace, which is not required to be proven in a trademark
Put it in writing: It's essential for the
franchisee to keep the franchisor's trade secrets confidential.
With this in mind, it's strongly recommended that all parties
in a franchise agreement sign a non-disclosure agreement before
engaging in any franchise negotiations. A franchise agreement is
also required to set out all IP rights including any patents,
trademarks, registered designs, and the terms and conditions for
use by franchisees. To avoid future conflicts with franchisees
ensure that the franchise agreement clearly set out limitations on
how your IP can be used.
Done correctly, franchising enables you to leverage the best
characteristics of your business. With the right growth strategy
and protection in place over the key assets, you can ensure the
franchised brand's long-term survival.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.Madgwicks is a member
of Meritas, one of the world's largest law firm
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The authors discuss 5 key ways Australian businesses can mitigate risks of engaging in expensive trade mark litigation.
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