Franchise trade marks: clarify rights to the name before you launch

The name of a successful business is not necessarily ready for use by other businesses. Before building a franchise network, you need to establish who holds the rights to the brand, what the protection covers and on what terms others may use it. This is more than an administrative exercise: a naming conflict discovered late could mean replacing shop signs, packaging and digital assets across franchisees’ businesses too.

1. Distinguish between the business name, the logo and the trade mark

Registering a company name, securing a domain and creating a social media account are not the same as obtaining trade mark protection. Just because your own business has used a name for years does not mean you have exclusive rights to it for every product and service you plan to offer.

Start by drawing up a brand inventory. Include not just the main logo, but every sign or name that a franchisee would use on their premises, in their offers or when making sales:

• the business name and any shortened version;
• the logo and any separate symbol;
• the names of own-brand product ranges or service packages;
• slogans used on an ongoing basis;
• the names of digital sales channels.

For each item, record who uses it, who created it, whether there is a contract covering it and whether it appears in a trade mark application or register. Copyright in the graphic design of a logo and trade mark protection are separate matters. Paying for design work does not, by itself, establish that all future uses have been authorised.

The aim is a verifiable inventory of legal rights, not simply a folder of brand assets. Only promise franchisees rights of use that you are actually entitled to grant.

2. Check that protection covers the planned operations

In Hungary, the principal rules on trade marks are set out in Act XI of 1997 on the Protection of Trade Marks and Geographical Indications. The Hungarian Intellectual Property Office handles national trade mark matters. Protection in Hungary may also arise through an EU trade mark or an international registration with the appropriate territorial coverage.

Your checks should therefore go beyond the Hungarian national register. You also need to examine other trade marks effective in Hungary, looking not only for identical signs but also for confusingly similar ones. The sound, meaning and appearance of a name, as well as the relationship between the goods or services concerned, may all matter. It is worth involving a trade mark specialist to assess the search results.

Check the specification of goods and services covered by your own protection too. If the original business provides food services but franchisees will also sell packaged own-brand products, you need to examine separately whether the protection adequately covers those products. A class number alone is no substitute for checking the precise wording of the specification.

Create a three-column table: planned use – existing protection – action required. This turns business expansion plans into specific legal tasks and reveals where an application, further searches or a name change may be needed before franchisee recruitment begins.

3. Document the chain of rights and the franchisee’s licence

The trade mark often belongs not to the company entering into the franchise agreement, but to the founder personally or to another associated company. This does not in itself prevent the development of a franchise network, but you must document how the franchisor is entitled to use the brand and authorise franchisees to use it.

If the franchisor itself operates under a licence, check whether that licence permits sublicensing. Duration is equally important: the franchisor should not promise a franchisee the right to use the brand for longer than its own agreement allows.

Hungary has no standalone, comprehensive franchise act, but Act V of 2013 on the Civil Code expressly recognises franchise agreements. Its provisions on these agreements, general contract rules and trade mark law are all relevant. The European Code of Ethics published by the Hungarian Franchise Association is a professional and ethical benchmark, not legislation.

The agreement, or a clearly identified schedule to it, should address at least the following:

• which signs and names may be used, with their registration details;
• the activities, territory and period covered by the licence;
• where the brand may appear;
• whether any sublicensing is permitted;
• how brand identity guidelines apply to the licence.

4. Set a decision point before franchisees invest

A trade mark application is not the same as granted protection. If the application is pending, this must be made clear to the franchisee rather than presented as completed brand protection. The investment timetable must also account for this uncertainty.

Set an internal approval point before ordering branded shop signs, packaging and other items that are difficult to change. By then, the search results, the identity of the rights holder, the status of protection and the franchisor’s right to grant licences should all be documented. Any outstanding risks should be subject to an explicit decision.

Also agree what will happen if a pending application does not result in the intended protection: who will decide on a new name or sign, which costs each party will bear and how deadlines will change. This does not replace advance checks, but it can prevent uncertainty later.

Practical takeaway: before the first franchisee invests in branded assets, complete the brand inventory, the protection checks and the documented chain of rights of use. A shared name is a stable foundation only when the rights behind it are also in order.