Trade marks and franchising: what to check before recruiting franchisees

A business name that is well known locally is not automatically ready to be shared with new franchisees. When you turn an existing business into a franchise network, you need clear rights to license the trade mark and protection that matches your plans. Before investing in franchisee recruitment, check that the name your network will grow under can genuinely be used and defended.

1. Establish who owns the trade mark and what rights they can grant

The first check concerns ownership. The trade mark may be registered in the name of the founder, a former company or someone other than the business that will sign the franchise agreements. Having paid a designer or used the name for years does not automatically settle these issues.

Bring the following together in a single file:

• the trade mark application, registration certificate and any renewals;
• up-to-date details of the owner and any transfers of ownership;
• agreements covering the creation of the name and logo;
• any licences already granted or received;
• disputes, oppositions and coexistence agreements with other trade mark owners.

If the franchisor does not own the trade mark, check that it has a valid legal basis both to use it and to grant franchisees permission to do so. A licence from another company does not necessarily include the right to sublicense: check its wording, territory, duration and termination provisions.

The aim: a documented chain of rights linking the trade mark owner to the franchisor and, in turn, to the franchisees. Have any gaps or inconsistencies resolved before promising rights to prospective franchisees.

2. Check availability, territory and the goods and services covered

In Italy, trade mark protection is governed primarily by the Industrial Property Code, Legislative Decree No. 30/2005. EU trade marks are also subject to Regulation (EU) 2017/1001. Applications for Italian registration are filed with the Italian Patent and Trade Mark Office (UIBM); applications for EU registration go to the European Union Intellectual Property Office (EUIPO).

Registering a company name, buying a domain name and setting up social media profiles are not equivalent to registering a trade mark. Prior use of an unregistered sign may also have legal significance, but it does not automatically put you in the same position as an appropriate registration.

Before filing an application, or expanding the use of a trade mark already applied for, commission a search for earlier rights. Searching for an identical name is not enough: similar signs, the goods or services concerned and potential risks of confusion must also be assessed. Finding no results in a general internet search does not establish that the name is available.

Then check two aspects:

• Territory: does the protection cover the places where you plan to develop the network? An Italian trade mark does not automatically provide protection abroad.
• Goods and services: does the specification in the application describe what franchisees will actually offer? The Nice Classification groups goods and services into classes for trade mark applications, but the wording of individual entries matters too.

For example, a restaurant business that also wants to distribute packaged products under its name needs to check that both activities are covered. Adding new activities may require further applications: do not assume that the existing certificate covers every future development.

3. Align trade mark protection with the franchise agreement

Law No. 129 of 6 May 2004 governs franchising in Italy and requires franchise agreements to be in writing, otherwise they are void. Trade mark protection and franchising law are complementary: registering a sign does not replace the franchisor’s obligations.

Article 4 requires information about the trade marks used in the franchise system to be included among the supporting documents supplied with a complete copy of the agreement at least thirty days before signing. This must include details of the registration or application, or of the licence granted to the franchisor by the third-party owner, or documentation demonstrating actual use of the trade mark. Do not present a pending application as an existing registration.

Have the agreement define precisely:

• which signs the franchisee may use and for which activities;
• where and for how long their use is authorised;
• which changes and promotional materials require approval;
• who handles reports of infringement and disputes;
• how use must cease once the relationship ends.

Also distinguish between the geographical scope of trade mark protection and any territorial exclusivity granted to a franchisee: these are separate issues. The former concerns rights in the sign; the latter depends on the contractual arrangements.

4. Put controls on use in place from the outset

A franchise network needs a recognisable identity in everyday use. Create a library of approved files, identify who approves applications of the trade mark, and keep a record of domains, accounts and their registered holders.

Set up a straightforward process for signage, packaging, local advertising and digital profiles. A franchisee who independently changes the name or registers a domain in their own name can cause problems even without any improper intent.

Also assign responsibility for renewal deadlines and for collecting evidence of use, such as photographs, advertising materials and dated business documents. Plan regular checks and an exit procedure covering the removal of signage, the ending of campaigns and the handling of accounts in line with the relevant agreements and applicable rules.

In practice: before looking for franchisees, complete three checks: who controls the trade mark, what it protects and how you will license its use. Have the file reviewed by an industrial property professional and the lawyer handling your franchise arrangements. Getting these foundations right before expanding avoids passing uncertainty on to the whole network.