Trade marks before franchising: secure the right to let others use your brand

When turning your existing business into a franchise network, customer recognition of your name is not enough. You also need to be able to give other business owners a clear and lasting right to use it. Checking your trade mark rights before expanding reduces the risk of franchisees investing in signage, premises and customer relationships built around a brand you cannot license on the terms promised.

1. Check what you own and what you can license

Start by distinguishing between a company name, a trade mark and a domain name. They serve different purposes and do not provide the same protection. Registering a company name or owning a web address does not, in itself, mean that the name is protected as a registered trade mark for your goods and services.

Draw up a simple inventory of the rights relating to what the franchisee will actually use:

• the customer-facing name,
• the logo and any separate product names,
• registered trade marks and pending applications,
• domain names and main social media accounts,
• agreements affecting the right to use or license these brand identifiers.

Record who holds each right and which document provides evidence of it. Pay particular attention if the founder is named personally as the rights holder, another group company owns the trade mark, or the name was acquired as part of a business purchase.

The franchisor does not always have to own the trade mark, but must have the right to license its use to franchisees. If that right rests on a licence, the licence must specifically allow this. Also check that its duration and termination provisions do not make it impossible for the franchisor to honour its commitments.

2. Assess whether the protection covers the planned business

Trade mark protection is not a blanket monopoly over a word. Its scope depends, among other things, on the goods and services covered and the geographical area in which it applies. Start with the franchise offering you actually intend to launch, rather than simply what the original outlet sells today.

For example, a business that has previously sold products may want franchisees to offer training or other services under the same name. The protection will then need to be assessed against this new use as well. Also check whether the registrations cover the word, a particular logo or both.

Search for identical and similar brand identifiers in the relevant trade mark registers. A search provides useful information, but does not guarantee that use is risk-free. Where there are similarities with earlier rights, a specialist trade mark adviser should assess the risk before you order signage or promise prospective franchisees that they can use the name.

Sweden’s Trade Marks Act (2010:1877) governs Swedish trade mark protection. Exclusive rights can arise through registration or through established use, but the latter requires an assessment of actual market recognition and can be harder to prove. Do not assume that long-standing use in one locality automatically provides the protection needed for expansion.

3. Make usage rights clear in the franchise agreement

The Swedish Intellectual Property Office (PRV) describes franchising as an advanced form of licensing, often with the trade mark at its core. In a franchise network, the legal right therefore needs to translate into day-to-day practice.

The agreement should identify which brand identifiers the franchisee may use and in what contexts. Supplement it with practical rules covering areas such as signage, workwear, local advertising, websites and social media. Specify which adaptations are permitted and which require approval.

Also decide who may register domain names and accounts containing the trade mark. Do not let these assets end up in an employee’s personal account for the sake of convenience. Document ownership, administrator access rights and the handover process when the people responsible change.

Set out how suspected infringement should be reported and who decides what action to take. Franchisees should not have to guess whether they may contact a local competitor or whether the matter must be handled centrally. At the same time, distinguish between the franchisor’s responsibility for the rights and the franchisee’s responsibility for complying with the usage rules.

4. Explain the actual status of the rights before signing

Sweden has no comprehensive franchise law, but the Act on Franchisors’ Duty to Disclose Information (2006:484) imposes specific pre-contractual requirements. The franchisor must provide clear, comprehensible written information well in advance of the agreement being concluded. This must include details of the intellectual property rights to be licensed to the franchisee.

Describe the rights accurately. A filed trade mark application is not the same as a granted registration. Disclose relevant restrictions and any oppositions or disputes that could affect the promised use. Meeting the disclosure requirements does not remove the need for a carefully drafted agreement or adequate trade mark protection.

Finally, appoint someone to take responsibility for renewals, register details and monitoring use. Keep the rights inventory, licences and usage rules in a shared location with controlled access, so that the records remain up to date.

Practical takeaway: Do not let anyone invest in your name until you have checked who holds the rights, what the protection covers and exactly what use you can promise.