Buying a franchise: check the right to use the trade mark

When you buy a franchise, you join a network whose shared brand makes it recognisable. But a familiar sign is no proof that the party you are contracting with has the right to let you use the name. Before you invest in premises, fitting out and launching the business, you need to check who owns the rights, what you may use and how long the permission lasts.

1. Identify the trade mark and its actual owner

Start by asking the franchisor for a written list of the trade marks included in the offer. This should specify word marks, logos, registration numbers, owners and the goods or services covered by the protection. Also ask for information about pending applications and any objections or disputes.

Check the details in the relevant registers. The Swedish Intellectual Property Office, PRV, handles Swedish trade mark registrations. The European Union Intellectual Property Office, EUIPO, handles EU trade marks, which can provide protection in Sweden too. International registrations may also cover Sweden; check that protection actually applies there and confirm its status.

Your checks should answer three questions:

• The right owner: Does the registered owner match the owner named in the documentation?
• The right business activities: Does the protection cover the goods and services you intend to sell?
• The right territory and status: Does the protection apply in Sweden, and is the registration still in force?

A registered business name or domain name is not the same as a trade mark registration. Trade mark protection can also arise through established use and recognition in the market, but assessing the evidence requires a different approach. If the concept relies on an unregistered brand identifier, have a trade mark lawyer review the documentation before you commit funds.

2. Trace the permission from the owner to your business

It is not necessarily a problem if the franchisor does not own the trade mark. The rights may belong to another group company or an overseas owner. What matters is that there is a valid right to authorise your particular business to use them.

Ask for documentation showing the full chain of permissions. If you are contracting with a Swedish master franchisee, it must have the right to sublicense the trade mark to local franchisees. A general statement that the company “represents the brand in Sweden” is not enough to base your decision on.

In particular, check:

• Whether the master agreement permits sublicensing and whether your agreement requires specific approval.
• Whether the permission covers your planned business activities and use of the trade mark.
• When the master agreement expires and how that relates to the term of your agreement.
• What happens to your permission if the relationship between the owner and the franchisor ends.

If the master agreement is confidential, you can request relevant extracts or written confirmation from the rights holder. Ask your lawyer to assess whether the documentation is sufficient. Any confirmation should specify the rights, rather than simply describe a good working relationship.

3. Make use of Sweden’s disclosure requirements

Sweden’s Act (2006:484) on Franchisors’ Duty to Disclose Information requires the franchisor, well before the franchise agreement is entered into, to provide clear, understandable written information about the meaning of the agreement and any other matters necessary in the circumstances.

The Act’s minimum requirements include information about the intellectual property rights to be licensed to the franchisee. The trade mark is therefore not just a matter for the sales presentation: the rights must be described in the pre-contractual information. The Act does not specify a fixed number of days for disclosure. Allow enough time in practice to review the material and obtain advice.

The disclosure obligation is not, however, a guarantee that the trade mark is free from disputes or that the agreement is financially favourable. Sweden does not have a comprehensive franchise law that replaces other legislation. Relevant legislation for these checks includes the Trade Marks Act (2010:1877) and the Contracts Act.

Request further information in writing where ownership, registrations or permissions are unclear. Keep dated versions of the information and draft agreements. This will help you check that the final agreement genuinely reflects the offer you have reviewed.

4. Set out what the permission means in practice

The agreement should clearly state which brand identifiers your business may use and in what contexts. Check, for example, signage, workwear, your website, local social media accounts and advertising. Distinguish between the right to use the brand and the obligation to follow its visual identity guidelines.

Also ask for clear terms covering situations where someone alleges that your use infringes their rights. Who must be notified? Who handles the matter and pays for legal assistance? What obligation does the franchisor have to arrange a workable solution if a brand identifier can no longer be used?

A forced name change may require new signs, packaging and digital materials. Clarify who decides on such changes, who pays and how much notice you will receive. Do not assume that the franchisor will automatically reimburse your costs.

Practical takeaway: Do not sign simply because you recognise the name. Make sure you have documented protection, an unbroken chain of permissions and clear contractual terms before paying for the right to use the trade mark.