Franchise brand protection: tackling unauthorised use

When you turn an existing business into a franchise network, protecting the brand can no longer remain the founder’s personal responsibility alone. A local franchisee may spot a misleadingly similar business name, copied branding or fake social media page before head office does. Before signing the first agreement, it is therefore worth deciding how a reported concern will lead to documented, proportionate and legally sound action. This guide covers handling unauthorised use, rather than applying to register a trade mark.

1. Define which incidents should be reported

Franchisees do not need to decide whether trade mark infringement has occurred. Their role is to report suspicious activity; the legal assessment belongs to a suitably qualified professional. If the agreement merely states that “the franchisee must protect the brand”, it does not explain when or how they should act.

Create a short reporting checklist with examples. Reportable concerns may include:

• the use of an identical or confusingly similar name for similar products or services;
• a shopfront, website or social media page that appears to represent an authorised outlet;
• an advertisement falsely claiming membership of the network;
• brand marks, shop photographs or advertising materials used without permission;
• a customer enquiry that reveals actual confusion.

Similarity alone does not prove infringement. The scope of protection, the products and services concerned, and the way the mark is used may all matter. Nor is a critical review or factual reference to the brand automatically unlawful. The reporting system should therefore not encourage attempts to remove every unwelcome mention.

The policy should distinguish between conduct by an outside party and a contracted franchisee’s incorrect use of branding. The latter is usually an internal contractual and operational matter and requires a different procedure.

2. Clarify who has authority to act under Hungarian law

Hungary has no separate, comprehensive franchise act, but franchise relationships are not unregulated: Act V of 2013 on the Civil Code expressly recognises franchise agreements as a distinct contract type. General contract rules also apply. Brand protection responsibilities should be allocated between the parties accordingly.

The principal Hungarian rules on trade mark protection and infringement are set out in Act XI of 1997 on the Protection of Trade Marks and Geographical Indications. For European Union trade marks, Regulation (EU) 2017/1001 is also central. A licence to use a trade mark does not automatically give every franchisee an unrestricted right to bring proceedings independently: entitlement to take action must be assessed under the applicable rules and licence terms.

Before the first franchisee joins, establish who owns the trade mark, who grants the licence to use it, and who is authorised to send formal notices or instruct a lawyer. This is particularly important if the founder owns the trade mark but a company enters into the franchise agreement.

The agreement should address the franchisee’s duties to report concerns and cooperate, head office’s response, and the principles governing responsibility for costs. An industry code of ethics is not legislation and does not replace these provisions. Do not promise to launch legal proceedings automatically in response to every report: commit instead to an investigation and a clearly documented decision-making process.

3. Create a straightforward evidence-gathering process

A forwarded screenshot is often insufficient to assess the situation. Include a standard reporting form as an appendix to the operations manual, recording when and where the issue was spotted, the address or link for the relevant page or platform, a description of the disputed use, and the reporting person’s contact details.

For online incidents, franchisees should, where possible, save the full page and its context, rather than just an isolated logo. For physical premises, the exact address, publicly visible signage and a description of the business activity can help. Where customers have been confused, record what they actually said, rather than the franchisee’s interpretation.

Set clear limits on the process:

• do not access someone else’s account or non-public premises without authorisation;
• do not collect unnecessary personal data;
• do not make public allegations of infringement before an investigation;
• do not enter into negotiations independently or send threatening correspondence.

Designate a central reporting channel and a backup contact. Restrict access to the information and manage it under a defined retention policy. If online content may disappear or a legal dispute is likely, seek legal advice on how best to preserve the evidence.

4. Ensure decisions, feedback and closure

Head office should first check whether the matter genuinely involves unauthorised use by an outside party. It may relate to an approved campaign, a contracted service provider or a previously authorised page or channel. It should then assess the likelihood of confusion, the extent of the use and its impact on customers.

The available options are not limited to litigation. They may include contacting the party concerned, sending a formal notice through a lawyer, submitting a report under the platform’s rules or, where justified, taking court action. These are not mandatory steps in a fixed sequence: an urgent situation involving harm may require a different response from an easily corrected mistake.

The franchisee who reported the concern should receive confirmation that it is being handled, be told whether further information is needed, and receive guidance on what they can say to customers. For example, they may state factually that a particular outlet is not part of the franchise network, provided head office has verified this. They should not have to improvise a legal assessment.

Keep a case log recording decisions, costs and outcomes. If the same misunderstanding keeps recurring, you may also need to improve the official outlet directory, the way authorised franchisees are identified or the information provided to customers.

Practical takeaway: before your first franchisee joins, prepare a one-page reporting form, appoint someone responsible for decisions, and clarify with a lawyer who is entitled to take action. The franchisee spots and documents concerns; head office coordinates a professional response.