Franchise Trade Mark Checks: Verifying Brand Usage Rights Before You Sign

Joining a franchise is not simply a matter of buying a shop sign. It means securing, through a contract, the right to use a brand and access its operating system. But if the party you are contracting with neither owns the trade mark nor has sufficient authority to let others use it, you could find yourself having to replace signage and packaging after opening. Choosing a sound franchise network means looking beyond brand recognition and checking the basis on which you can reliably use its name.

1. Identify the trade marks you will actually use in the disclosure document

Franchise transactions in South Korea are governed by the Fair Transactions in Franchise Business Act. This Act sets out requirements for registering and providing franchise disclosure documents and for the contents of franchise agreements, including provisions on the use of business identifiers. Registration of the trade mark itself and the scope of its protection are assessed separately under the Trade Mark Act. The two Acts cover different matters, so reading the franchise agreement alone is not enough to complete your trade mark checks.

Find the information on trade marks and other intellectual property associated with the brand in the disclosure document, then compare it with the signage and logos you will actually use. Registration of a disclosure document does not mean that the government guarantees the security of the trade mark rights or the commercial viability of the business. Nor does a similar business name on a business registration certificate or a corporate registry certificate prove that the trade mark is registered.

Ask the franchisor for the following documents to help establish what you need to check:

• A list of the word marks and graphic logos the franchise outlet will use
• The application or registration number for each trade mark
• Documents confirming the current rights holder and the term of protection
• Evidence of the licence or other authorisation where the franchisor is not the rights holder

If a brand uses a Korean name on delivery apps and an English-language logo at its outlets, list them separately. Checking one main trade mark will not establish the status of every identifier you will use. If the name in the sales materials differs from the business identifier in the agreement, first obtain written confirmation of the name under which your outlet will open.

2. Check current status and scope of protection, not just registration

You can search for the brand name and the numbers provided by the franchisor on KIPRIS, South Korea’s intellectual property search service. Name searches can produce different results depending on spacing, Korean or English spelling and logo design, so search by number as well. In the results, check not only the applicant or rights holder but also the application or registration status and the specified goods and services.

An ‘application’ means that registration has been requested, not that registered trade mark rights have been secured. A pending application does not, by itself, mean that franchise recruitment is unlawful. However, the franchisor should explain how it would address the possibility of refusal or a conflict with other rights. Equally, even if a registration number exists, you still need to check whether the rights remain valid.

The scope of trade mark protection is not determined by the brand name alone. For example, if a mark intended for use by a restaurant is registered only for certain packaged foods, ask how the restaurant services are protected. Do not assume that rights necessarily conflict because goods or services fall within the same class, or that there is no problem because they fall within different classes.

Keep a dated record of your search results and check the latest status again just before signing. Do not rely solely on an old copy of a trade mark registration certificate to establish current ownership and rights; consult the trade mark register where necessary. If the specified goods or the significance of similar marks are difficult to interpret, ask a Korean patent attorney to review them alongside your proposed business activities and the logo you intend to use.

3. Trace the authority to license where the owner and contracting party differ

A trade mark may be owned personally by the franchisor’s chief executive or by an affiliated company, with the franchisor operating under a licence. This structure is not inherently problematic. What matters is whether the franchisor has actually secured the authority to allow franchisees to use the mark, and whether that authority will last for the intended contract term.

Send the franchisor the following questions in writing:

• Until when is the licence between the rights holder and the franchisor valid?
• What gives the franchisor authority to allow franchisees to use the mark?
• Does the permitted use cover signage, delivery apps, packaging and online promotion?
• What happens to existing franchisees if the agreement between the rights holder and the franchisor ends?

The franchisor may say that it cannot provide the full agreement because it contains commercially confidential information. In that case, request an extract or written confirmation identifying the rights holder, the relevant marks, the scope and duration of permission, and whether franchisee use is authorised. A simple assurance that ‘the chief executive owns it, so there is no problem’ is no substitute for evidence of authority.

Pay particular attention if the franchisor’s licence expires before your franchise agreement does. Even if you are told it renews automatically, check the renewal conditions and grounds for termination. If you cannot obtain evidence of authority, do not assume that all is well. Treat it as an unresolved risk when deciding whether to proceed.

4. Allocate the costs of trade mark disputes in the contract

A trade mark problem can cost more than replacing the sign. It may also mean discarding packaging and printed materials, updating delivery app listings, notifying customers, commissioning new photography and suffering losses from interrupted trading. Itemising these costs when obtaining quotes will help you understand the potential impact of rebranding your outlet.

Ask for the agreement to confirm that the franchisor has lawful authority to permit use of the agreed business identifiers, and to set out clear notification and response procedures for related disputes. In practical terms, it is important to establish who should receive any warning letter sent to your outlet by a third party and who will handle the legal response.

You can negotiate how costs are allocated according to the cause of the problem. A rebrand caused by the franchisor’s lack of authority should be distinguished from a dispute arising because an outlet owner altered a logo without approval. If the agreement includes sweeping wording such as ‘the franchisee is responsible for all trade mark disputes’, seek legal review rather than accepting it as it stands. Unfair standard terms may be unenforceable under South Korea’s Act on the Regulation of Terms and Conditions, but assessing a particular clause requires consideration of the specific circumstances.

If a problem with authority prevents you from using the agreed brand, separately negotiate a deadline for remedying the issue, conditions for using an alternative identifier, the settlement of costs and possible termination of the agreement. Rather than assuming that these protections apply automatically, it is safer to spell out the scope of each party’s responsibility and the deadlines for meeting it in the contract.

5. Use your findings to inform the decision to sign

Finally, prepare a one-page checklist for the trade marks. For each one, record the identifier you will use, its registration status, the rights holder, the franchisor’s licensing authority, supporting documents and the date checked, together with any unresolved questions. This also lets you compare the transparency of different brands’ rights arrangements separately from their public profile.

You do not need to rule out a brand simply because its trade mark application is pending or the rights holder is a different party. What matters is whether the franchisor provides consistent documentation, explains uncertainties and accepts responsibility when problems arise. If explanations conflict with the documents, obtain corrected materials before making your decision.

Action summary: Identify the trade marks you will use, verify their current legal status and the franchisor’s authority to permit their use, then record in the contract who will bear the costs of any problem with that authority. It is best to complete these checks before committing to hard-to-reverse expenditure such as producing signage or ordering packaging.