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INTELLECTUAL PROPERTY LAWYERS SYDNEY
FRANCHISOR VS. FRANCHISEE: THE RIGHTS TO INTELLECTUAL PROPERTY
Franchises are a growing business structure in the Australian market. This is beneficial as it allows locals to be part of national and international chains.
WHAT MAKES FRANCHISES BETTER THAN START-UPS?
With many pros of franchises, it is important to note they are, in most cases:
- Unilateral: In some instances, franchise agreements are in favour of the franchisor- giving more favourable terms of agreement to the one party;
- Non-Negotiable: Agreements are drafted for consistency across local and global chains;
- Full of Must-Dos: as they often place stricter obligations on franchisees;
- Full of Can’t-Dos: Policies and procedures place many restrictions on franchisees.
When entrepreneurs wish to invest in a franchise, they invest in the brand as a whole. Franchises come with the name, logo, business idea, training, processes and the secret methodologies. This makes them desirable investment opportunities. For this reason, franchisors are, in most instances, subject to boundaries. This is to ensure the protection of the already built reputation and intellectual property rights.
INTELLECTUAL PROPERTY FOR FRANCHISORS
In the words of Warren Buffett, “it takes 20 years to build a reputation and five minutes to ruin it.”
For this reason, a business must protect itself if wishing to alter its business structure into a franchise. This will uphold brand name and reputation when open for investment to third parties.
“Your IP is your most powerful tool in the franchise negotiation process. It's important to consider protecting all forms of IP and your unique business methods. This assures a potential franchisee (buyer) and is an effective business insurance for you as a franchisor (seller).” (IP Australia, 2016)
Not only do intellectual property rights grant greater protection, but also work as “insurance.”
If the intellectual property is not adequately protected, it may lead to issues of franchisees, or even competitors, misusing the franchisor’s copyrights, patents and/or trademarks. This is especially crucial for the recognised brand name and the trade secrets.
Going back to the words of Warren Buffet, protecting your brand name upholds your reputation across all franchise chains. But in saying this, one wrong may be all it takes to jeopardise this reputation.
INTELLECTUAL PROPERTY FOR FRANCHISEES:
It is the responsibility of the franchisee to uphold the reputation of the brand. The intellectual property of the business is under ownership of the franchisor or parent company. This means by agreeing to a franchise, you agree to the responsibilities that come with it.
When reviewing a franchise agreement, all intellectual property rights must be readily listed. These include the terms of use by the franchisee. As part of their due diligence, investors must ensure all the necessary documentation is provided.
It is best for franchisees to consult with intellectual property lawyers before signing an agreement. This must be maintained throughout the lifetime of the business also.
Our intellectual property lawyers in Burwood, Sydney CBD, Brisbane, and nationwide, will ensure the consistency and fairness within each franchise agreement. This will include:
- Confirming the validity of intellectual property articles
- Franchise license agreements and what they entail
- Protection and consequences of infringements of intellectual property rights
For further information as a franchisor or franchisee, write to our intellectual property lawyers at info@prominentlawyers.com.au.
The comments in the article are general in nature and should not be relied upon as a substitute for professional advice. Anyone intending to apply the information contained in this newsletter should seek their own professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. This article is issued as a helpful guide to clients and for their private information. Therefore, it should be regarded as confidential and not be made available to any person without our prior approval.
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