Franchising a Hong Kong Business: Checking Trade Mark Ownership and Defining Brand Usage Rights

Using a shop name for years does not necessarily mean the franchisor can safely authorise others to use it. Before turning an existing business into a franchise network, establish the legal basis for the brand’s protection and use in Hong Kong. Then specify the permitted marks, uses and restrictions in the franchise agreement, rather than discovering ownership or infringement problems after franchisees have ordered signs and packaging.

1. Distinguish Business Names from Trade Mark Rights

Company registration, business registration and trade mark registration are separate systems. Registering a company name or obtaining a business registration certificate does not confer exclusive trade mark rights over that name, nor does it guarantee that using it will not infringe someone else’s rights. Successfully registering a domain name or social media account is no substitute for trade mark checks either.

Hong Kong currently has no legislation specifically regulating franchising. Nor does it have mandatory franchise registration, a standardised pre-contract disclosure regime or a statutory franchise code. The filing and eligibility requirements under mainland China’s Regulations on the Administration of Commercial Franchises do not apply directly to franchise arrangements operating solely in Hong Kong.

This does not mean franchise relationships are outside the law. The parties’ rights and obligations are governed by, among other things, common law contract principles. Trade mark registration and infringement principally fall under the Trade Marks Ordinance (Cap. 559), while unregistered brands may also be protected through common law passing-off actions. Misrepresentations made when recruiting franchisees may engage the Misrepresentation Ordinance (Cap. 284), and restrictions within the relationship must also be considered under the Competition Ordinance (Cap. 619). An association’s membership code is not a statutory franchise code applicable throughout Hong Kong.

2. Create a Verifiable Trade Mark Register

Keeping a single image of the logo is not enough. The franchisor should maintain a record for every mark it intends to license, including Chinese and English names, logos and combined versions. Each record should include:

• The application or registration number, jurisdiction and current status;
• The registered owner, renewal date and person responsible internally;
• The goods or services covered, and how franchise outlets will actually use the mark;
• Documents relating to any licences, assignments, disputes or restrictions on use.

Checks should go beyond identical names to consider similar wording, pronunciation and imagery, as well as related goods or services. Class numbers are only a starting point: the key is to check the specific scope listed in the registration. For example, a trade mark registration for restaurant services should not be assumed to cover all packaged food sold at retail.

Registration in mainland China or elsewhere does not provide registered trade mark protection in Hong Kong. Nor does filing an application mean it has been approved. Similar marks, objections or uncertainty over coverage should be assessed by a Hong Kong trade mark professional. Do not describe preliminary search results as a ‘guarantee of no infringement’.

3. Confirm That the Franchisor Has the Right to Grant a Licence

Even established businesses can have ownership arrangements that do not match their franchise structure. A trade mark may still be registered in the founder’s personal name while a different company signs the franchise agreement. Alternatively, an associated company may own the mark, with the franchisor relying on verbal permission to use it. Common shareholders do not mean companies can automatically share trade mark rights.

The franchisor should maintain a complete documentary chain showing who owns the mark, who is permitted to use it and who has the authority to license it to franchisees. If relying on an upstream licence, check that it covers Hong Kong and the proposed business activities, and expressly permits licensing to franchisees. Its duration and termination provisions should also be checked against the proposed franchise term.

If there are gaps, put the appropriate assignment or licensing arrangements in place before promising usage rights to franchisees. Where a trade mark application is pending, disclose its status accurately and agree in advance on alternatives, approval procedures and responsibility for costs if the application encounters problems. Franchisees should not simply be required to bear the cost of a name change themselves.

4. Define Permitted Uses in a Schedule to the Agreement

A franchise agreement should do more than state that ‘the franchisee may use the brand’. A more practical approach is to attach the approved trade mark versions and a schedule of permitted uses. Specify whether shop signs, uniforms, packaging, food delivery platforms, websites and social media accounts are included, together with the applicable premises, territory and term.

Also specify who can approve colour changes, abbreviations, the addition of local place names or use alongside other logos. Clarify whether franchisees may register domains or accounts containing the brand name, and who will retain control of those accounts and maintain usage records. These arrangements should be settled before signs are produced and accounts opened, rather than addressed retrospectively after launch.

The franchisor should also supply standard artwork files and a clear approval contact so that franchise outlets do not redraw logos themselves. If a third party makes an infringement complaint, the agreement should set out whom to notify, how to preserve evidence, how external responses will be handled and the principles for allocating legal costs. Franchisees should not admit liability without authorisation, and the franchisor should not guarantee that the original brand can continue to be used in every circumstance.

Practical takeaway: Before offering franchises, prepare a trade mark register, ownership and licensing documents, and a brand usage schedule. Only when all three align do you have brand usage rights you can genuinely grant to franchisees—not merely a name to put on a sign.