Franchise Intellectual Property

If I am proposing to franchise my business, what IP issues do I need to think about?

IP is at the heart of franchising. In addition to the distinctive branding, there will be a bespoke system for how to run the franchise based on certain know-how.

It is important that franchisor take appropriate steps to protect their IP from third parties, most importantly their franchisees.

What kind of IP will be involved in a franchise?

The kinds of IP involved in a franchise will typically include the following:

• Trade marks and other branding
• Copyright including in the operations manual, website and marketing material
• Know-how in the franchise system

How can you protect your franchise IP?

The type of protection that is available depends on the type of IP.

• Trade marks can be protected by registration
• Copyright protection arises automatically and does not need to be registered
• Know-how is generally protected by documenting it and keeping it secret

A franchise is basically a licence by a franchisor to a franchisee allowing the franchisee to use the franchisor’s IP, subject to the terms of the franchise agreement and other relevant documents including the operations manual.

A well drafted franchise agreement will contain a variety of legal provisions that are designed to protect the franchisor’s IP, including the following:

• a clearly drafted licence in favour of the franchisee setting out what it can and cannot do with the franchisor’s IP
• post termination covenants preventing the franchisee from competing with the franchisor for a period of usually around 12 months
• an acknowledgment by the franchisee that:
  • the franchise IP will at all times be owned by the franchisor
  • any new IP created by the franchisee will be owned by the franchisor

Are there any other steps that can be taken to protect the franchisor’s IP?

In a franchise situation it is common for the franchise IP to be owned by either one of the founders personally or a different company to the franchisor. This is done to shelter the IP from the commercial and legal risks taken by the franchisor.

Do I need a separate IP licence agreement?

Most franchise agreements refer to the franchisor potentially asking the franchisee to sign a separate IP licence but most franchisors don’t bother doing that and just rely on the IP licence provisions contained within the franchise agreement.

If you need any advice on franchise intellectual property, please contact a member of our team in confidence here or on 02920 829 100 for a free initial call to see how they can help.