Buying a NZ Franchise: Check Your Trade Mark Licence

A recognised name can be a major reason to buy a franchise. But paying a franchise fee does not mean you own that name, or that every claimed brand right is protected in New Zealand. Before joining a franchise community, check exactly which trade marks you can use, who controls them and what happens if those rights are challenged.

1. Identify the brand rights you are buying

Start with a written list of the brand assets your business will use. This might include the trading name, logo, product names, slogans and distinctive branding on vehicles or premises. Ask the franchisor to identify which are registered trade marks, which are applications awaiting a decision and which are unregistered.

These categories are not interchangeable. An application is not a completed registration, and an overseas registration does not automatically provide protection in New Zealand. Unregistered branding may have legal protection, but the basis and strength of that protection need separate assessment.

Ask for the relevant New Zealand registration or application numbers. Have your lawyer check the Intellectual Property Office of New Zealand register rather than relying only on a brochure or a certificate supplied by the seller.

The check should cover:

• The registered owner’s legal name.
• Whether the registration is current.
• The actual words or image protected.
• The goods and services covered by the registration.
• Any limitations or other recorded matters requiring investigation.

A registered company name or domain name is not a substitute for a trade mark registration. Equally, a registered logo does not necessarily provide the same protection as a separate registration for the brand’s wording.

2. Confirm the franchisor can license the marks

The trade mark owner and the franchisor may be different entities. That is not automatically a problem: a group company or overseas owner might hold the intellectual property and license its use. What matters is whether the franchisor has sufficient authority to give you the promised rights.

Ask your lawyer to verify the connection between the registered owner and the entity named in your franchise agreement. Where a separate licence is involved, request evidence that it allows the franchisor to authorise franchisees to use the marks in New Zealand.

Compare that authority with your proposed business activities. Does it cover the services you will supply, the products you will sell and the ways you will advertise? Does it extend to websites, social media accounts, delivery listings and vehicle branding where relevant?

Your agreement should clearly identify the licensed rights, either directly or through a sufficiently precise schedule. Avoid relying on a general assurance that you can use “the brand”. Ask what happens if ownership changes or a key registration expires, and who is responsible for maintaining protection.

3. Understand the New Zealand legal framework

New Zealand has no franchise-specific legislation governing the ongoing franchisor–franchisee relationship, no statutory franchise registration scheme and no generally applicable statutory franchise disclosure regime. General laws therefore matter alongside the wording of your agreement.

The Trade Marks Act 2002 is central to registered trade mark protection. Registration gives the owner exclusive rights in relation to the registered goods or services, subject to the Act’s limits. Your permission to use those rights should be established by the contractual arrangements.

The Fair Trading Act 1986 prohibits misleading or deceptive conduct and unsubstantiated representations in trade. Claims about brand ownership, registration or the right to license a mark should therefore be supported, not simply accepted as sales language. The Contract and Commercial Law Act 2017 may also be relevant to contractual remedies and misrepresentation.

Membership of the Franchise Association of New Zealand is voluntary, but its members must comply with its Code of Practice and Ethics, including disclosure requirements. That code is not legislation, and membership does not replace independent checks of intellectual property rights.

Keep copies of written claims about brand protection and give them to your lawyer before signing.

4. Allocate the risk of a challenge or rebrand

Even a registered mark can become the subject of a dispute. Ask whether there are existing objections, infringement allegations or proceedings affecting the branding you will use, and request the answers in writing.

Then examine how your agreement handles a challenge. Who leads the response if another business alleges infringement? Must you notify the franchisor immediately? Who pays legal costs, and does any contractual protection cover your losses or only the franchisor’s position?

Check whether the franchisor can require replacement branding and who pays for new signs, uniforms, packaging and online assets. Ask what happens to unusable branded stock and whether you must keep paying fees during any interruption. Your accountant can assess the potential exposure once your lawyer has explained the allocation of responsibility.

Practical takeaway: Before committing, obtain a trade mark schedule, verify the franchisor’s licensing authority and have your lawyer explain who carries the cost if the promised branding cannot be used.