Before Franchising in Taiwan: A Practical Guide to Trade Mark Ownership, Licensing Scope and Exit Arrangements

Running a successful shop does not mean its name and logo already have the legal protection needed for franchising. For established businesses preparing to offer franchises in Taiwan, a trade mark is more than a sign above the door: it underpins franchisees’ ongoing investment in fit-outs, marketing and customer relationships. This guide focuses on preparing to license trade marks, helping prospective franchisors clarify three questions before recruitment begins: who owns the rights, what can be licensed, and how use must end when the relationship finishes.

1. Start by checking whether the franchisor actually controls the trade mark rights

Taiwan’s Trade Mark Act is based on protection through registration. Registering a company name, business, domain name or social media account does not confer trade mark rights. Nor does using a shop name for many years necessarily give a business the right to prevent others from using a similar sign.

First, list your existing brand assets individually, including the Chinese name, any names in other languages, logos and other identifying signs actually used for products or services. Then check the trade mark search system operated by the Taiwan Intellectual Property Office (TIPO), under the Ministry of Economic Affairs, for the following:

• Rights holder: Is the mark registered in the name of the operating company, the founder personally or another group company?
• Status: Is the application pending, is the mark registered, is it approaching expiry, or is it subject to a dispute?
• Specified coverage: Do the approved goods or services cover what franchise outlets will actually offer?
• Version in use: Do the designs currently used on signage and packaging match the registered trade mark?

If the founder owns the trade mark personally, the franchisor should not license it to franchisees on the strength of verbal consent alone. It should first arrange an assignment or put in place a clear licence that includes the right to sublicense. If a design agency created the logo, copyright ownership and rights of use also need to be checked separately. Paying a design fee does not automatically transfer all rights to the franchisor.

The practical outcome should be a trade mark rights register, not merely a collection of registration certificates. Each mark should be linked to its owner, registration details, expiry date and legal basis for licensing.

2. Design the licence around how franchise outlets will actually use the brand

A trade mark review should go beyond checking whether a mark is ‘registered’. For example, if a brand has previously provided only restaurant services but plans to sell its own branded packaged food after launching a franchise network, it must reassess whether its specified goods and services provide sufficient coverage. Do not assume an existing registration covers every new use. Class numbers are only a starting point: the specific goods and services listed must also be examined.

Before investing in signage and packaging, the franchisor should also search for earlier trade marks that could create a conflict. Search results do not guarantee freedom from infringement. Similar names, related goods or services, and disputes over rights should be assessed by a trade mark professional in Taiwan.

Once the checks are complete, translate the licence scope into practical situations that franchisees can understand:

• Is use permitted on all shop signage, uniforms, menus and packaging?
• Can the brand name be used on delivery platforms, online shops and social media accounts?
• May franchisees print their own promotional materials or run joint promotions with nearby businesses?
• May franchisees supply the logo to contractors producing materials, and what restrictions apply?

Do not confuse territorial protection with an exclusive trade mark licence. A promise not to add further franchise outlets within a particular area concerns the location of outlets; whether a trade mark licence is exclusive involves a separate set of rights and obligations. Address the two separately and check that neither conflicts with existing licences.

3. Align the licence terms with Taiwan’s legal requirements

Taiwan does not have a single dedicated franchise statute, but that does not mean franchising is unregulated. Franchisors need to consider the Fair Trade Act and the Fair Trade Commission’s Disposal Directions (Guidelines) on the Business Practices of Franchisors. Franchise agreements and trade mark licences also engage the Civil Code and the Trade Mark Act respectively.

The guidelines identify information about licensed intellectual property, including trade marks, as important transaction information. This includes whether rights have been obtained or applications are pending, their substance, duration, scope of use and restrictions. A pending trade mark application should not be presented to prospective franchisees as an existing registration. Concealing important information may engage Article 25 of the Fair Trade Act where the conduct is obviously unfair and capable of affecting trading order; not every omission from a document automatically amounts to a breach of the law.

Trade mark licence terms should cover at least the following:

1. Licensed rights and term: Identify the trade marks, permitted uses, territory and how the licence term relates to the franchise agreement.
2. Use and approval: Specify designs, colours, permitted materials and the approval process for franchisees’ own advertising.
3. Fees and responsibility: Explain whether trade mark use is included in the franchise fee or royalties, and who will handle disputes over rights.
4. Maintaining rights: Allocate responsibility for renewals, monitoring infringement and notifying franchisees of changes to the status of the rights.

Under Taiwan’s Trade Mark Act, a trade mark licence cannot be asserted against third parties unless it is recorded on the register. This does not mean an unrecorded licence is necessarily invalid between the parties. Obtain professional advice on whether to record the licence and which form of licence suits the actual arrangement.

4. Test brand use through a pilot and plan the exit in advance

Before recruiting franchisees, use a company-operated pilot outlet to test the brand guidelines. Ask the manager to create a promotional graphic, set up a platform page and order a batch of packaging using the guidelines. Observe whether they still need to keep asking the founder for clarification. If they do, the guidance is not yet sufficient for franchisees to work independently.

The operations manual should provide approved artwork files, prohibited uses, the person responsible for approvals and the expected response process. Quality checks should be tied to specific product and service standards, with procedures for improvement notices and follow-up, rather than simply stating that franchisees ‘must not damage the brand image’. Clear, consistent requirements help sustain shared trust in the brand across the franchise network.

Exit arrangements should also be agreed before an outlet opens: when signage must be removed, how remaining packaging will be handled, when platform pages must be renamed and who controls brand-related accounts. Do not assume the franchisor can simply log into accounts held by a franchisee. Account permissions, handover procedures and platform rules must all be checked in advance. Nor should franchisees be tacitly allowed to keep using the brand indefinitely after termination to clear stock.

Practical takeaway: Before offering franchises, complete a trade mark rights register, a schedule of permitted uses and an exit checklist. Then have a legal professional in Taiwan review the chain of rights and the contracts. Only rights that the franchisor genuinely controls, can clearly define and can maintain over time should be made available for shared use across a franchise network.