Buying a franchise: check the franchise’s trade mark rights

A recognisable name can be a major reason for buying a franchise. But an attractive shopfront and a professional logo do not prove that the franchisor can legally authorise you to use that name. As part of a franchise network, you work together to build brand value. Before you buy, check who owns the rights, what your right to use the brand covers and what happens if the trade mark is challenged.

1. Find out who actually owns the trade mark

Ask the franchisor for a list of the trade marks you will use, including registration numbers, rights holders, validity periods and the goods and services covered. Consider not only the franchise name, but also its logo and any own-brand product names.

For the Netherlands, registrations with the Benelux Office for Intellectual Property (BOIP) and the European Union Intellectual Property Office (EUIPO) are particularly relevant. International registrations may also provide protection in the Benelux countries or the European Union. Check the details in the relevant registers; do not rely solely on an old registration certificate.

Focus on four points:

• Status: is the trade mark registered, or is there only a pending application?
• Rights holder: is the registered owner the same party that is granting you the right to use it?
• Territorial coverage: does the protection actually extend to the Netherlands?
• Goods and services: does the registration cover the activities you will carry out?

Registration with the Netherlands Chamber of Commerce (KVK) is not a trade mark registration. Trade name rights and trade mark rights have different legal foundations. Trade name rights can arise through actual use, but do not automatically offer the same protection as a registered trade mark. If there is no trade mark registration, seek advice on what protection does exist and what uncertainty you would be accepting.

2. Check the full licensing chain

The franchisor does not have to own the trade mark. It may, for example, belong to a separate group company or an overseas owner. This is not necessarily a problem, provided the franchisor has the authority to grant you the agreed right to use it.

In that case, ask for evidence of the licensing chain: from the trade mark owner to the franchisor, and then to you. A statement that this is ‘handled within the group’ is not enough. Ask your legal adviser to establish whether the underlying licence allows the franchisor to grant sublicences to franchisees.

Compare the terms of the agreements as well. A franchise agreement lasting several years offers insufficient certainty if the main licence expires earlier and there is no arrangement for continued use. Also investigate whether a restructuring, sale or breach of obligations by the franchisor could affect your right to use the trade mark.

Ask these questions in writing:

• May I use the trade mark on my shopfront, website, social media, packaging and invoices?
• Are additional permissions or separate licence fees required?
• What conditions apply to local advertising materials?
• What happens to my right to use the trade mark if the main licence ends?

A franchise brand originating outside the Netherlands requires particular care. Recognition abroad does not automatically mean that the trade mark is available for use or adequately protected in the Netherlands.

3. Include trade mark risks in your statutory pre-contract checks

The Netherlands has specific franchise legislation: the Dutch Franchise Act, incorporated into Book 7 of the Dutch Civil Code, Articles 911 to 922. Trade mark rights are also governed by, among other legislation, the Benelux Convention on Intellectual Property and, for EU trade marks, the EU Trade Mark Regulation.

Article 7:913 of the Dutch Civil Code requires the franchisor to provide information before the agreement is concluded. This includes other information that the franchisor knows, or can reasonably be expected to suspect, is important to your decision. A known dispute threatening the use of the franchise name may fall within this obligation. Article 7:915 also requires you, as a prospective franchisee, to take reasonable steps to avoid signing on the basis of incorrect assumptions.

Explicitly ask about oppositions, invalidity or revocation proceedings, cease-and-desist letters and agreements with owners of similar trade marks. A register search alone will not reveal every potential conflict. Ask not just whether a dispute exists, but also what consequences it could have for your outlet.

Have any uncertainties assessed by a specialist trade mark lawyer or trade mark attorney. Registration is important evidence, but it does not guarantee that the trade mark can never be challenged.

4. Agree who bears the risks and costs

Turn your findings into specific contractual provisions. Have the agreement confirm that the franchisor is authorised to permit the agreed use of the trade mark. Discuss who will respond if a third party raises an objection and who will pay the legal costs. Do not assume that a general support clause adequately covers this.

A forced name change can mean costs for signage, printed materials, staff uniforms, packaging and digital channels. You may also lose revenue if customers temporarily find your outlet harder to recognise. Agree how costs will be shared, what practical support will be provided and what options you will have if you can no longer use the trade mark.

Keep register extracts, written answers and relevant evidence of licences in your purchase file. Where necessary, refer to these documents in the agreement so that the basis for your decision is clear.

Practical takeaway: only sign once three things are clear: who owns the trade mark, why the franchisor is entitled to let you use it, and who pays if that use is threatened.