Franchising in China: How to Check Trademark Licensing Chains and Permitted Use

Using a brand on shop signs for years does not necessarily mean that head office can license that same brand to franchisees. The trademark may be registered in the name of a founder, an associated company or an external partner, and an existing licence may cover only company-owned operations. For businesses preparing to expand through franchising, establishing who has authority to grant licences, how the brand may be used and for how long matters more than preparing franchise recruitment materials.

1. Build a rights register based on the branding outlets actually use

Do not simply ask the administrative team for a trademark registration certificate. Start with company-owned outlets: identify the words, graphics and combined marks used on signs, menus, packaging, uniforms, delivery-platform profile images and promotional images, then match each one to the relevant rights documentation.

Create a trademark checklist recording at least:

• The mark actually used and where it appears;
• The registration number, registered owner and goods or services covered by the registration;
• The registration’s validity period and current legal status;
• The basis on which the franchisor holds its rights;
• How, where and for how long franchisees are expected to use the mark.

Check both the registration certificate and the current status. Acceptance of an application does not mean registration has been granted, and an old certificate alone cannot establish that the rights remain unchanged. Check word marks, figurative marks and combined marks separately. Registration of one does not justify describing all brand assets as registered trademarks.

China’s Regulations on the Administration of Commercial Franchising list registered trademarks, business logos, patents and proprietary know-how among the business resources used in franchising; they do not require a business to hold every type of resource. However, if a business promises franchisees the right to use a particular trademark, it should be able to demonstrate a sound legal basis for that promise.

2. Distinguish permission to use a trademark from permission to license it to franchisees

One easily overlooked problem is that head office may have the right to use a trademark without having sufficient authority to sublicense it.

For example, a founder may personally own the trademark and allow the company to use it at company-owned outlets. This does not, by itself, establish that the company can grant rights to independent franchisees. Nor does shared use of a brand within a corporate group replace clear licensing documentation.

Check each link in the chain from the registered trademark owner to the franchisor and then to the franchisee. Identify the registered owner, any intermediate licensees and whether each licence permits the next grant of rights. Pay particular attention to territory, the goods or services covered, duration, licence type and whether sublicensing requires separate consent.

If a licence merely states that the trademark may be used for ‘brand operations’, clarify whether this includes franchising, licensing use to franchisees and the specific uses franchisees will make of it on signs, packaging and online storefronts. Do not rely on verbal explanations from franchise recruitment staff to fill critical gaps in the documents.

Under the Trademark Law of the People’s Republic of China, a registered trademark owner may license another party to use its registered trademark by entering into a trademark licence agreement. The licensor must supervise the quality of the goods, and the licensee must ensure their quality. Trademark licences must also be filed as required by law; an unfiled licence cannot be asserted against a third party acting in good faith. Trademark licence filing and commercial franchise filing are separate requirements and cannot substitute for one another.

3. Keep franchise agreements within the scope of upstream rights

Once the rights review is complete, set out the rights available to franchisees in the franchise agreement or a schedule. Rather than simply stating that ‘the franchisee may use the brand’, identify the trademarks, the goods or services covered by their registrations, authorised uses, duration and any uses requiring prior approval.

Set clear, practical boundaries: which approved artwork files franchisees may use, whether they may change colours or combine the mark with other wording, whether they may register accounts containing the brand name, and whether they may supply brand assets to advertising production contractors for agreed work. Also make clear that permission to use the brand at an outlet does not confer the right to appoint sub-franchisees.

Compare two timelines in particular: the upstream licence term and the franchise agreement term. If head office’s licence expires before the franchise agreement, an expectation that it will be renewed is not an existing right. Resolve the gap before signing, or have qualified advisers devise and fully explain appropriate arrangements, rather than hiding the risk in broad disclaimers.

China’s Regulations on the Administration of Commercial Franchising require written agreements to cover matters including the scope and term of the franchise, variation, cancellation and termination. Any trademark licensing schedule should align with these provisions. Outlet branding guidelines may provide operational detail, but cannot expand rights that head office does not possess.

4. Introduce pre-signing checks and ongoing alerts

Make trademark verification an internal prerequisite for signing, rather than waiting until an outlet is being fitted out to gather missing documents. The legal team or a designated person should verify the rights documentation, operations staff should confirm how the brand will actually be used, and franchise recruitment staff should check that external promises stay within the verified scope.

China’s Measures for the Administration of Commercial Franchise Filing require the submission of registration certificates for trademark rights, patent rights and other business resources relevant to the franchise activities. The Regulations on the Administration of Commercial Franchising also require prescribed information and the contract text to be provided in writing at least 30 days before the agreement is concluded. Information about business resources relevant to the rights granted to franchisees must be disclosed accurately. A pending trademark application must not be presented as a registered trademark, nor a limited licence as permanent ownership.

After signing, set reminders for trademark expiry dates, upstream licence expiry dates and renewal preparations. If an ownership dispute, a claim to revoke permission or a change in the scope of use arises, first assess its impact. Then decide whether to suspend new grants of the affected rights, and address existing franchisees’ use in accordance with the law and their contracts. Do not instruct every outlet to replace its signage immediately without first assessing the situation.

Practical takeaway: Start with a table linking each mark actually used to its rights holder, licensing chain, permitted uses and expiry date. Any promise of trademark rights to franchisees that lacks documentary support should be resolved before it appears in contracts or franchise recruitment materials.