Franchising or trade mark licensing: how to choose in Italy

You have an established business and another entrepreneur wants to use your brand. Is a licence enough, or are you building a franchise network? The answer depends on the substance of the relationship, not the title of the document. Clarifying this distinction before presenting an offer helps you make commitments you can sustain and correctly apply the protections required under Italian law.

1. Start with what you grant, not what you call the contract

Italian Law No. 129 of 6 May 2004, entitled “Rules governing franchising”, defines franchising in Article 1. It is a contract, whatever its name, between economically and legally independent parties: in return for payment, one party grants the other a package of industrial or intellectual property rights and services, bringing it into a network of franchisees operating across a territory to market goods or services.

The phrase “whatever its name” is crucial. Calling an agreement a “commercial collaboration”, “trade mark licence” or “partnership” does not prevent the law from applying if the relationship has the characteristics of franchising.

A trade mark licence, by contrast, primarily authorises the use of a distinctive sign within agreed limits. It is also governed by the Italian Industrial Property Code, Legislative Decree No. 30/2005, particularly Article 23. It may include conditions of use and checks: these alone do not automatically turn it into a franchise agreement.

The distinction therefore requires an assessment of the relationship as a whole. No single clause, considered in isolation, can determine how every business arrangement should be classified.

2. Map out the relationship you actually want to offer

Before asking a professional to draft the contract, prepare an outline of what the other entrepreneur will receive. Look beyond the brand: consider everything that currently makes your business recognisable and enables it to operate effectively.

Organise the outline into four sections:

• Rights granted: the trade mark, trading signage, creative materials, any other rights and the limits on their use.
• Knowledge transferred: procedures, sales techniques, organisational methods and practical experience that is not readily available on the market.
• Ongoing services: the support, advice, updates and shared tools you actually intend to provide.
• Integration into the network: how entrepreneurs will participate in a recognisable, coordinated system.

For each item, also specify what the recipient must do and what payment will be required. The payment structure alone does not determine the nature of the relationship: a licence may also involve recurring fees, while the absence of a charge labelled a “royalty” is not enough to rule out franchising.

Above all, this exercise helps identify implicit promises. If you present the opportunity as access to a complete business method, but the document only grants permission to use the trade mark, that mismatch needs resolving before negotiations begin.

3. Check which obligations apply to franchising

Where the proposed arrangement constitutes franchising, Law No. 129/2004 is not optional. Among its main requirements, the contract must be in writing, otherwise it is void, and the franchisor must have tested its business format on the market before establishing the franchise network.

Article 3 also requires the contract to specify certain details, including initial investment and expenses, how royalties are calculated and paid, any territorial exclusivity, the nature of the services offered, and the conditions governing renewal, termination or transfer.

At the pre-contract stage, Article 4 requires the franchisor to give the prospective franchisee a complete copy of the contract, together with the attachments required by law, at least thirty days before signing, subject to the specific exceptions provided for. Article 6 requires loyalty, fairness and good faith during negotiations.

These rules cannot be bypassed by choosing a different label. Nor is a genuine licence free from legal requirements: the relevant provisions of the Italian Industrial Property Code and the general rules of the Italian Civil Code still apply, including those on pre-contractual good faith.

4. Have the practical arrangements reviewed too

Give your lawyer not just a draft contract, but also sales presentations, service descriptions, payment schedules and materials intended for prospective business partners. The legal classification must be based on the relationship you actually plan to establish, not on a document detached from day-to-day operations.

Ask for an explicit assessment of three points: which type of contract accurately reflects the proposal, what obligations follow from it, and what organisational changes are needed before you offer it to others. If you begin with a simple licence and later add the transfer of business methods, support and coordination, have the agreement reviewed again: changes in practice may alter its legal classification.

In practice: first write a one-page summary of the rights, knowledge, services and payments involved. Only then choose the appropriate contract with a professional adviser. To build a sound franchise network, the legal structure must reflect what you genuinely offer.