Franchising is an important option to consider when looking to expand a successful business across Canada. However, without adequate trademark protection, your franchise system may be vulnerable. Here’s why registered trademarks are essential for franchisors.
The Role of Trademarks in Franchising
A franchise business is built with the help of a consistent brand identity. Selecting a brand and developing a franchise agreement that includes a trademark license with brand use guidelines help to ensure that:
- Franchisees use the same business name and logo
- Customers get a uniform brand experience
- The franchisor maintains control over brand standards
Selecting & Protecting a Franchise Brand
In the process of selecting the brand name, a franchisor should work with a trademark lawyer to search brands of interest. A trademark lawyer can guide the franchisor by explaining why it is important to select a distinctive brand. Sometimes a franchisor will cling to a brand only to be advised that it is not available for use and registration in Canada. It is important for a franchisor to be open to considering several different brand options during the early brainstorming phase.
If the franchise will only operate in Canada, then the clearance search can be tailored appropriately. If the franchise will operate across North America, then it will be important to conduct clearance searches both in Canadian and American trademarks databases.
Once a brand name has been cleared in a trademark clearance search, the franchisor should consider the different types of trademark applications that will be most beneficial for the business. For example, the franchisor will likely want to file a word mark application for the house brand. The franchisor may also want to file a design mark application for the business logo. A house mark is the main trademark that identifies a franchisor’s overall brand that will appear across all franchisee locations.
The franchisor may also consider whether it should file additional applications for variants of the logo design or important taglines or slogans. For example, the franchisor may have one logo that is displayed horizontally and another that is displayed vertically. When filing design mark applications, it is important for the franchisor to realize that they should file the application(s) for the design(s) that they will use in association with their goods/services. If it is important to the business, the franchisor may also consider filing subsequent applications for product or service marks.
Once the brand has been cleared, and the franchisor has worked with a graphic designer to finalize logos and designs, the franchisor should work with the trademark lawyer to prepare and file the appropriate trademark applications.
Register Before You Franchise
Franchisors should register their trademarks before offering franchises. Doing so:
- Establishes exclusive nationwide rights
- Prevents franchisees (or competitors) from registering first
- Strengthens franchise disclosure documents
- Bolsters brand identity from the beginning
Without registered trademarks, enforcing consistency among franchisees could be difficult. However, because the trademark process in Canada can be lengthy (upwards of two years), it may be sufficient to file the applications and proceed with franchisees based on the pending applications rather than wait for the registration certificates to issue. Consulting with a franchise lawyer at this juncture is highly recommended.
Trademarks in Franchise Agreements
Franchise agreements are detailed legally contractual agreements that must be prepared with care, and working with a franchise lawyer is highly recommended. When it comes to preparing trademark license clauses, it is advisable and beneficial to work with both a franchise lawyer and a trademark lawyer.
Franchise agreements must clearly outline:
- Details of the trademark(s)
- Descriptions of the goods/services and business operations
- Licensing rights to use the trademarks
- Quality control provisions to protect brand integrity
- Restrictions on unauthorized use
- Provisions for how to manage a breach of contract
Well-drafted agreements protect both the franchisor and franchisee.
Enforcing Trademark Rights Against Franchisees
Sometimes disputes arise when franchisees mis-use trademarks or operate outside their licensed rights. Registered trademarks give franchisors the legal leverage to:
- Stop unauthorized use
- Terminate agreements when necessary
- Maintain the reputation of the franchised brand
Understanding proper trademark use is crucial for both franchisors and franchisees. A franchisor must understand how their trademarks should be used so that they can identify instances of improper use. It is crucial for franchisors to notify franchisees of improper trademark use as soon as possible to protect the integrity of their brand and to maintain distinctiveness.
It is equally important for a franchisee to understand the proper way to use the franchisor’s trademarks. A franchisee would not want to accidently misuse a mark in such a way to potentially jeopardize their business operations or their contractual obligations under the franchise agreement (or trademark license agreement).
Consulting a trademark lawyer is beneficial for both franchisors and franchisees to establish, develop and maintain a branding strategy.
FAQs ABOUT TRADEMARK PROTECTION FOR FRANCHISES
Do I need trademark protection before franchising?
- Yes. Without adequate trademark protection, your franchise brand may not be legally enforceable. It is best to conduct a trademark search, prepare and file trademark applications, and obtain trademark registration certificates before franchising.
Can a franchisee register the brand?
- No. Only the franchisor should own the trademarks.
What happens if a franchisee keeps using my mark after termination?
- Trademark registration gives you grounds to stop them legally. You should consult with a trademark litigator to explore your options.
FINAL THOUGHTS
Registered trademarks help to lay the foundation of successful franchise businesses in Canada. Selecting and clearing the brand is crucial for new franchisors starting out. Franchise agreements and trademark licensing provisions are complicated, requiring careful thought and planning. Best practices include clearing the brand, filing applications, and securing registration certificates (if possible) before franchising.
Ready to protect your brand? Contact Anchor IP Law for a branding consultation today.
