Franchising an Existing Business: Trade Mark Checks and Licensing Before Recruiting Franchisees
Using a trading name for years does not necessarily mean franchisees can use it with confidence. This guide explains the steps franchisors in Japan should take, from trade mark searches and ownership checks to licensing and recruitment disclosures.
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Can franchisees confidently use the name and logo that customers already know from your existing outlets? Building a franchise community requires clarity about the rights and responsibilities involved in using the brand, before you put up matching signs. This article focuses on the practical steps an existing business in Japan should take, from checking trade marks before recruiting franchisees to setting up licensing arrangements.
1. Take stock of trading names, logos and product names
The first step is not to file a trade mark application, but to establish what franchisees will be allowed to use. List not only the trading name, but also logos, abbreviations, distinctive product names, service names and other signs that help customers identify the provider. Record where each is actually used, such as on signs, packaging, booking websites and online shops.
Your list should include at least the following:
- The exact name of each sign and its image files
- The goods and services for which it is currently used, and where it appears
- How franchisees are expected to use it in future
- Application and registration status, reference numbers, rights holders and the person responsible for administration
- Any contracts with external design agencies or other third parties
Registering a company name, securing a domain name or using a trading name for many years is not the same as registering a trade mark. Even if company-owned outlets have encountered no problems, opening in another region or starting online sales may bring conflicts with third-party rights to light.
Care is also needed if the existing logo differs from a new logo intended for franchise recruitment. Registration of the old logo does not automatically mean the new one is safe to use. Finalise the signs you intend to use when preparing recruitment materials.
2. Check the scope of protection and ownership, not just registration status
Under Japan’s Trade Mark Act, trade mark rights arise upon registration. Distinguish clearly between an application that has been filed and a mark that has been registered. Registration also does not give you exclusive rights across all goods and services. You need to check both the registered mark and the goods and services specified in the registration.
For example, if a business operating under a restaurant name also plans to sell packaged food through franchisees, checking only a registration covering the provision of food and drink is insufficient. Consider the protection needed for both the services provided at the premises and the products sold. It is also important not to judge the scope of rights or potential conflicts solely by whether class numbers match.
Use resources such as J-PlatPat, Japan’s patent information platform, to search for marks with similar pronunciations or appearances as well as identical wording. However, a small number of search results is no guarantee of safety. A Japanese patent attorney or lawyer can help assess similarity between names, their relationship to the specified goods and services, and potential issues under the Unfair Competition Prevention Act involving well-known signs, even where those signs are unregistered.
Ownership is another practical priority. If the rights are held by the founder personally or by an affiliated company, the franchisor company may not be free to license their use to franchisees. Establish whether an assignment or licence is needed and whether sublicensing to franchisees is permitted. For logos commissioned from a design agency, check copyright and contractual conditions of use separately from trade mark rights.
3. Define permitted uses and the franchisor’s responsibilities
Once the rights position is clear, reflect it in the trade mark provisions of the franchise agreement or in a separate trade mark licence agreement. The key is to identify the licensed assets and conditions, rather than merely stating that the franchisee may use the brand. If you use a separate agreement, make clear which agreement takes precedence if their terms conflict.
| Item to decide | Details to clarify |
|---|---|
| Licensed assets | Names, logos, registration numbers and approved files |
| Scope of use | Relevant outlets, goods and services, and advertising media |
| Permitted modifications | Colours, proportions, additions to outlet names and bespoke wording or designs |
| Approval process | Materials requiring approval, where to submit requests and expected response times |
| Use by third parties | Conditions for supplying files to sign makers and advertising agencies |
| Fees | Whether a licence fee applies and what is covered by royalties |
Social media account names and local advertising created by franchisees are particularly prone to inconsistent use. Decide whether prior approval is needed for independently created websites that could be mistaken for official brand websites, and for registering domain names containing the brand name.
At the same time, avoid a system in which preparations for opening stall while franchisees wait for approval. Providing pre-approved materials that can be used without modification helps reduce the burden on franchisees.
Set out whom to contact if a third party sends a warning or demand, who is responsible for deciding how to respond, and how to seek professional advice. You need a process that prevents franchisees from replying or settling independently, while ensuring the franchisor does not leave the matter unresolved. Consider decision-making procedures and cost allocation for measures such as replacing signs, taking account of the cause of the problem.
4. Align recruitment materials, pre-contract disclosures and agreements
Japan has no single comprehensive statute governing all franchises. However, specific disclosure rules and general laws apply. Trade mark licensing is governed by the Trade Mark Act, contractual relationships involve legislation such as the Civil Code, and transactions between franchisors and franchisees as independent businesses are subject to the Antimonopoly Act.
Article 11 of the Act on the Promotion of Small and Medium-sized Retail Business requires franchisors whose operations qualify as a ‘specified chain business’ under the Act to provide prospective small and medium-sized retail franchisees with prescribed information in writing, and explain it, before entering into a contract. The required disclosures include the trade marks, trade names and other signs that franchisees will use. Even for retail or food-service businesses, applicability should not be decided simply by the business’s label. Check the statutory requirements, including ongoing supply or arrangement of goods, management guidance, contractual terms and the collection of payments.
The Japan Fair Trade Commission’s guidelines on franchise systems under the Antimonopoly Act also identify conduct in franchise recruitment and franchisor–franchisee dealings that may raise competition law concerns. These guidelines are neither a trade mark registration system nor a scheme for approving franchisors. Holding a registered trade mark does not justify every restriction imposed on franchisees.
Recruitment materials should accurately distinguish between marks for which no application has been filed, pending applications and registered marks. Even where a mark is registered, avoid suggesting that its registration protects the entire brand or every aspect of the business. If you recruit under a name with an application pending, you need to explain specifically that it is not yet registered, that the name may have to change, and how any change would be handled.
Even where statutory disclosure duties do not apply, the status of trade mark rights and the conditions of use are important to a prospective franchisee’s decision. Cross-check recruitment materials, disclosure documents and draft agreements, and eliminate inconsistencies, including in verbal explanations.
5. Decide whether recruitment can begin and assign responsibility for rights management
To prevent trade mark checks from becoming a one-off exercise, maintain a register covering registration details and actual use. Assign someone to monitor renewal deadlines, changes to rights holders’ names or addresses, logo changes, and expansion into new products or services. As the franchise network grows, uses that were not originally anticipated are likely to emerge.
Before recruitment begins, review the following points together:
- Have the main names and logos that franchisees will use been finalised?
- Have existing registrations and third-party rights been investigated?
- Does the franchisor have authority to license their use?
- Are the conditions of use and fees clearly documented?
- Do the descriptions of rights in recruitment materials match those in the draft agreement?
- Has someone been assigned responsibility for responding to warnings and handling name changes?
Trade mark registration is not a universal statutory prerequisite for recruiting franchisees in Japan. However, if serious doubts remain about whether the core brand can be used or whether the franchisor has authority to license it, you should reconsider starting recruitment. Once franchisees have invested in signs and advertising, changes will have a greater impact.
Practical takeaway: start with a single-page list of the names and logos you will provide to franchisees. Working through ownership, scope of protection, conditions of use and the information you give prospective franchisees is the starting point for building a community that can share the brand with confidence.
