Most franchise systems would own a combination of intellectual property (IP). A typical franchise system would commonly have at least the following IP:

  • trade marks (such as logos, slogans, brand names and the like);
  • know-how and trade secrets (which may be recorded in the Operations Manual); and
  • copyright (such as in the operations manual, training manuals, marketing materials, and documents recording the systems used to run the business).

Categories of Intellectual Property in a Franchise System

  1. Reputation: IP that allows franchisees to take advantage of the reputation that the franchisor has developed in relation to its products or services.
  2. Replicating Success: IP that would allow franchisees to replicate the franchisor’s successful business model.
  3. Business Development: IP that allows the franchisees to benefit from the franchisor’s ongoing business development activities.

Branding Tips for Franchises

Case Study by Sherry Design Studios

A memorable, consistent brand is the single most important feature of your business proposition. It adds true value to your franchise model, differentiates it from competitors and connects your target market to the business. Franchising was built upon the premise of effective branding driving consumer demand. To develop a world-class franchise brand, there are three primary tasks;

  1. Create a position and personality for your brand based on the unique features of your business – in short, develop a brand strategy.
  2. Gain visual impact with a well-conceived logo and brand identity that becomes more than a mere symbol of your franchise. It must reinforce the positive aspects of your brand and create an emotional response.
  3. Do all of the above with a reputable branding company!

Top Tips for IP for Franchisors

  • Take account of all IP that the business owns: You may have more IP than you think. Assets such as an operations manual, website or software program that you use in your business can be IP that is potentially valuable to you and your franchisees. Consider asking your lawyers to assist with an IP audit. You should ensure the IP is owned by an entity separate from the trading entity.
  • Make sure all IP created by employees has been properly assigned to the business: This should be covered off in your employment agreements. If it isn’t, you will need an assignment and will need to update your employment agreements.
  • Don’t be too open or too revealing with potential franchisees when it comes to letting them know how the business works: It is important to keep key aspects of your business model and processes confidential to all outsiders, including suppliers, potential franchisees who have yet to sign and potential investors who are yet to commit any money to the venture.  You don’t want people just walking away and copying your idea as business ideas (alone) are not easily subject to protection.
  • Register everything that can be registered: In particular, you should apply for trade marks for any logos, trade names, brands and slogans that are crucial to the business.
  • Consider what your IP is worth: This is a big part of what you are selling the franchisee on. It is important that the IP you own is valued and franchisee fees are set accordingly.

International Trade Mark Strategy

Case Study by Craig Caruana, Chief Operating Officer of FlipOut

If you intend to build a global franchise, invest in registering your trade marks in target markets at least 12 – 18 months in advance of any advertising or recruitment activity in any overseas country.  If you are recruiting, make sure you don’t give away information to your competitors.  Visit those countries during franchise expo periods and actively recruit amongst people who are genuine prospects and who understand franchising. The dates for all franchise expos are available online months in advance to facilitate planning.

Choose countries where you can develop a support structure (where you and your staff can visit regularly) as you can underestimate the amount of physical time and effort is involved in developing any overseas market.  Some staff members may have to relocate to ensure consistency of service and ensure the rollout is successful so factor that into any decision regarding which countries you plan to target.

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If you are a potential franchisee entering into a franchise system or have any questions about protecting your IP, get in touch with LegalVision’s franchise team today on 1300 544 755 or fill out the form on this page.

This article was an extract from LegalVision’s Franchisor Toolkit. Download the free 32-page toolkit featuring case studies from leading Australian franchisors.

Tim Mak
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