Franchisees purchase a franchise based on the brand, system, intellectual property and or product or service, which it delivers. What are you paying for and does it really exist?

What’s a brand name?

Though a product or service is the core of a business the brand name may be considered to be Everything! Think of these brands: Coke, McDonalds, Gloria Jean’s, Michel’s Patisserie, Hairhouse Warehouse, Mortgage Choice and Fastway Couriers. A brand can be things or actual people. Brands are the public perception of a thing or person. Companies work very hard to establish their brand, sometimes failing when they attempt to tie a secondary product into the popular brand name.

It’s all about public perception. Is Coke the real thing? Does McDonald’s offer the best tasting, most nutritious hamburger? We have been trained by skilled marketers to make the above associations. We have been conditioned over time to accept the advertising as real, whether we actually believe it or not.

Franchise Systems must remain acutely aware of their image, the perception of each and every customer, and to a great extent, the marketplace as a whole. Their position in the marketplace, often dictated by the perceived quality of its products, its reputation for service, its leadership in the field and its consistency will certainly have a great deal to do with the effectiveness of its brand.

In franchising, maintaining a consistent and unified brand is difficult. Franchise companies naturally have more challenges than corporations because the local marketing and media is usually executed by the franchisees. And if franchisees aren’t marketing experts, which they are not expected to be, this poses a challenge unless the franchisor believes in the “power of strong brand consistency”.

The people and companies behind the above brand names are well known. They are established. They have earned the right to be positioned where they are in the public’s eye and accordingly can and will seek in most cases a significant fee to license the use of that brand. Today, this is generally considered the Upfront Franchise Fee.

Strong franchisors provide their systems with guidance on marketing and promotional plans, they provide advertising elements in an electronic format that allows for local customisation and they create a professional brand image that the franchisees can be proud of!

Why is it important that the franchisor believes in “the power of a strong brand?” Because as a franchisee, this is what you are buying – the rights to use the brand name.

Is the Brand protected?

In Australia there are a wide array of avenues for franchisors to protect their brand. Copyright, Patent or Trade Mark protection, are to name a few. In many cases franchisors have copyright in respect to their franchise documentation, Operations Manuals and marketing initiatives used in the operation of the franchise system.

Where some young emerging franchisors get caught out, is the legal protection of their brand. Many emerging franchise systems believe they have created a new brand of which includes words and a logo but find that particular business names, company names or trade marks had been previously registered. In such case, it may need to be questioned what value is there in the brand.

The importance of brand protection must not go unnoticed and this is precisely why it is covered in the franchisor Disclosure Document. Franchisees must ensure whether through their own enquires or legal advisers that the brand has been protected and that the franchisor has rights to use of such name and whether there are any limitations in relation to such use.

I have seen a number of instances where a franchisee operating under a particular brand has found a similar type business being operated within a reasonable distance from the franchise operation operating under a same or similar name. After making some enquiries, it was evident that the independent business had common law rights in relation to use of that name in that territory. In these cases, the franchisor is limited in its ability to prevent the independent business from continuing to operate under such name within a particular area.

In conclusion

Ensure that you know what you are buying and that what you’re buying exists and is protected in the interests of the franchisees.