Take steps to protect your IP and avoid disputes with your franchisees.

Intellectual property or IP is at the heart of franchising. IP includes your trademarks, your designs, logos, and original material in which you hold copyright such as your operations manuals. A common brand or trademark for your system is one of the key elements that legally defines a franchise. In fact, the IP of a franchise system is in fact for many franchisors their only real asset.

So it is obviously important to protect that asset and that means not only from attack from third parties and competitors but also from those in your system including your franchisees, ex-franchisees and potential franchisees. By attack we mean making use of your IP or taking possession or ownership of it without your consent.

If others make use of your IP assets for purposes not approved by you it will affect the value of your IP and your business.

So what are the steps to take if you want to protect your IP assets and avoid disputes with your franchisees about what they can or can’t do with your IP?

1.Register your brand

Firstly make sure you have protection. Register your trademarks with IP Australia in all the right classes and add to them and update them when you rebrand or expand the scope of your business.

This shows everyone that these images or words (or even colours) belong to you and you have the right to use them for these goods or services. 

Make sure you renew your trade marks and don’t let them lapse. If you want to expand internationally then you will need to lodge your marks in those other countries before you start talking to potential master franchisees or others. The same applies for designs and patents or other registrable material if those apply to your business.  

You need expert advice on this. While lodgement and registration of trade marks can sometimes lead to disputes with others who claim prior rights, it is better to have all this sorted out sooner rather than later. Stake your claim as early as possible. 

A word of caution: registering your company name or business name with ASIC does not give the legal protection or ownership rights of a trade mark.

2.  Keep a secret

Keep confidential information confidential: a lot of material cannot be registered so to protect it you need to make sure that it doesn’t fall into the hands of someone who can copy it and make use of it for their own purposes.

This includes potential franchisees or master franchisees – always have them signed to a franchise agreement or a confidentiality agreement with these protections before you hand over your trade secrets including manuals or software and customer information.   

3. Set the rules up front

Your franchise agreement needs strong clauses about identifying your IP, its ownership and how it can be used.

This can help deal with typical issues:

• Can a franchisee use your brand name in their company name? (usually not a good idea)
• Can they have a separate website or register a domain name similar to the franchisor? (again not recommended)
• What happens after the franchise ends? For example if a particular colour is strongly associated with your brand (even if it is not registered by you) does the franchisee have to change the colour of the vehicle or the premises if they leave the system? 
• Are any developments or improvements made by the franchisee to your IP deemed the property of the franchisor?
• What about rebranding and updating: can you require a franchisee to upgrade to your new design or look?
• Customer lists reports and information: preventing the misuse of these and retaining their confidentiality after termination is critical to some businesses.
• Franchise agreements and manuals need to deal with social media and the internet – does a franchisee have the right to open a Twitter account using their own business name?

If everyone is clear about the rules then you are going to avoid trouble later.

4. Monitor and enforce

It is critical to act quickly if you see a franchisee breaching the rules. Your brand is everything and your other franchisees will also want to see you act to protect their investment. 

If, for example, a franchisee starts using Facebook, Twitter or other social media on their own you are likely to lose some control of how your IP is used. You can allow it but ensure you set rules for its use (refer previous paragraph) to avoid embarrassing and brand damaging tweets and posts.

Enforcement and protection of IP must be consistent and constant. You can set up simple Google and other alerts to let you know whenever your brand name is mentioned online or you can pay a media monitoring service for this. Obviously nipping problems as early as possible is the best method of avoiding disputes with the franchisee in question or your other franchisees.

5. Take action

It cannot be stressed enough that leaving your IP without protection, not setting firm guidelines for its use and not enforcing those rules will leave your IP open to attack from within your system as well as from outsiders. 

Your brand can be damaged and its value will be diluted and then ultimately you lose the very element that makes your franchise system unique. Make it a priority – it is your business after all.