Trade Mark Checks Before Franchising: How to Secure Brand Usage Rights

Using a name at your premises for many years does not necessarily mean you can safely authorise others to use it. When you expand an existing business into a franchise network, the same brand appears repeatedly on signage, packaging and online ordering screens. If a trade mark problem arises, franchisees as well as the franchisor may face replacement costs and customer confusion. Before preparing recruitment materials, it is therefore important to establish who may use which brand elements, and within what limits.

1. Distinguish business identifiers from registered trade marks

Article 2(1) of South Korea’s Fair Transactions in Franchise Business Act defines a franchise business by reference to the use of business identifiers, specified quality standards and operating methods, support, training and control, payment of franchise fees, and an ongoing trading relationship. A business identifier does not necessarily have to be a registered trade mark. It may include an independently recognisable trading name or shop sign.

This means that an unregistered trade mark does not exempt a business from franchise legislation. Conversely, qualifying as a franchise business does not itself create exclusive rights to the brand. Whether an arrangement constitutes a franchise and whether trade mark rights have been secured are separate questions.

Under South Korea’s Trade Mark Act, trade mark rights arise upon registration. The trading name on a business registration certificate, the name on the corporate register and an internet domain you have secured are all worth checking, but none replaces trade mark registration. Start by collecting the names and logos currently used at your premises, then identify which you want to protect and which franchisees will be allowed to use.

It is sensible not to treat a name in text form and a graphic logo as a single item. The name within a logo may also be used on its own, or an abbreviated version may appear on packaging. Listing each form actually used reduces the risk of overlooking something when reviewing potential applications.

Your working inventory should include an image of each identifier, evidence of its first use, where it is used, who created it and whether an application has been filed. If you operate several outlets with similar names, distinguish the main brand from individual outlet names. This provides a clear starting point for searches, even if responsibility passes to someone else.

2. Check the scope of protection, not just identical names

A trade mark search should cover not only identical names but also marks that are similar in sound, appearance or meaning. Changing the spacing or a single character does not necessarily remove the risk of conflict. Use your own searches to narrow down the possibilities, and seek advice from a patent and trade mark attorney or another qualified professional on significant decisions.

The name is not the only thing to check. Assessing the scope of trade mark protection requires considering the registered mark, the goods and services specified in the registration, and similarities between the relevant goods and services. Goods within the same class do not necessarily fall within the same scope of protection, while different classes do not always rule out a conflict.

For example, if a restaurant operator plans to sell packaged food under the same name, checking only registrations covering restaurant services may not be enough. Review activities that currently generate revenue separately from those planned after the move into franchising.

• List the core goods and services provided at your premises.
• Add planned expansion activities, such as packaged products and online sales.
• Check relevant applications, registrations and the status of rights for each activity.
• Record your findings and proposed responses for marks that may present a conflict.

Date your search results. Distinguish pending applications from registered marks, and check whether rights remain in force. Avoid assuming that an old search screenshot reflects the current position.

3. Ensure the franchisor has authority to license use

An existing business may have registered its trade mark in the owner’s personal name. If a separate company later becomes the franchisor, the trade mark rights do not automatically transfer to that company. Apply the same checks where a family member, co-founder or associated company owns the mark.

Options include transferring ownership or putting an appropriate licensing arrangement in place. The right approach depends on ownership and business plans, but the franchisor must have a clear basis for authorising franchisees to use the mark. Do not assume that permission for the franchisor to use a mark also allows it to authorise franchisees to use it.

If the franchisor obtains a licence, check that the agreement addresses the relevant marks, goods and services, territory, duration and whether use by franchisees can be authorised. Also consider what happens to existing franchisees if the agreement between the trade mark owner and the franchisor ends.

Check separately whether transferring rights or establishing a licence requires registration or other formalities in addition to a contract. Keeping the relevant agreements and registration records together makes it easier to demonstrate the basis of your authority.

If an external designer created the logo, review the design contract too. Paying for the work does not necessarily transfer all copyright. Check that you have the permissions needed to modify and reproduce the logo, apply it to packaging and supply it to franchisees. Review the licence terms for any fonts or images used as well. Keep trade mark issues and rights in design assets distinct in your records.

4. Reflect the same rights position in disclosure documents and contracts

Article 6-2 of the Fair Transactions in Franchise Business Act provides for the registration of franchise disclosure documents. These must be registered with the Korea Fair Trade Commission or the competent city or provincial governor. When information changes, check whether the relevant change requires an amendment registration or notification. Descriptions of trade marks must also match the actual rights position.

In particular, do not describe a pending application as a registered trade mark. Cross-check application and registration numbers, the applicant and current rights holder, and the registered form against the form actually used. Use consistent wording in recruitment brochures and consultation materials so that prospective franchisees do not misunderstand the level of protection.

The franchise agreement should specify which business identifiers may be used, the permitted scope of use and what must not be altered without approval. Include uses beyond shop signage, such as delivery platform listings, local promotional accounts and outlet-specific advertising. Responsibility for removing signage and online branding after the contract ends should also be clear.

The priority is to match the agreement to the rights the franchisor has actually secured, rather than simply copying a model agreement or another brand’s clauses. If you promise franchisees broader usage rights than the owner has authorised, you may be unable to fulfil that promise, even with a written contract in place.

5. Plan for disputes and rebranding costs before expanding

The final stage of a trade mark review is not filing away the registration certificate, but planning how to respond if a problem arises. Decide who will gather evidence and seek legal advice if a third party demands that use of the mark stops. You also need a procedure requiring franchisees to consult the franchisor before responding to the other party or agreeing a settlement independently.

Consider a scenario in which the brand must change, and list what would need replacing: signs, packaging, uniforms and online displays. Who pays and how long the transition takes may depend on the cause of the change and the contract terms. Rather than automatically placing all costs on franchisees, assess reasonable allocation criteria and their legal validity.

Before approving franchise recruitment internally, confirm that the rights holder has been identified, the scope of protection fits the business plan, there is a basis for authorising franchisee use, and the explanatory materials are accurate. Assign responsibility for unresolved issues and define what must be done to close them. Do not conceal matters that could affect investment decisions.

Action summary: This week, start by preparing an inventory of your brand identifiers and a table showing who owns or may use each one. Rather than rushing to recruit under an unchecked name, establish usage rights and responsibility for handling problems first. That is the starting point for protecting the investment shared across your franchise network.