If you are a franchisor or are thinking about setting up your franchising enterprise, you have undoubtedly heard about intellectual property. Just in case you need a refresher, intellectual property is the term used to describe various kinds of intangible assets which may include trade marks, copyrights, patents, designs, and trade secrets.

Franchising is considered one of the most effective ways of exploiting your business’ goodwill and reputation through monetising your intellectual property. A franchise agreement usually involves the franchisor licensing their IP to the franchisee for a fee and under certain conditions.

If you are a franchisor or are thinking about franchising your business model, here are five intellectual property issues to think about and consider for your franchise agreement. 

1. What Kind of Intellectual Property Does Your Business Own?

Most successful businesses would have a combination of trade marks, copyrights and trade secrets. More tech or research-driven businesses may also have designs and patents as well. Once you have identified what type of IP you have, make sure that you clearly set out your ownership of your IP in your franchise agreement. Carefully consider what IP you would like to licence to your franchisees and the attached conditions. Most franchise agreements would provide franchisees a non-exclusive, non-transferable license to use the franchisor’s IP. This means that while your franchisees may use your trade mark, they will not be able to amend it or use it for purposes other than in relation to their franchise business.

2. What Intellectual Property Are You Licensing?

Carefully consider which of your IP you would like to license to your franchisees and the conditions attached to these licenses. Most franchise agreements would provide franchisees a non-exclusive, non-transferable license to use the franchisor’s IP. This means that while your franchisees may use your trade mark, they will not be able to amend it or use it for purposes other than in relation to their franchise business.

3. How Can the Franchisee Protect Your Intellectual Property?

In addition to including essential licence terms, it would also be useful to provide franchisees with additional guidance on how they assist in protecting and enforcing your intellectual property. For example, information on what constitutes trade mark infringement and what they should do if they feel that someone is infringing your trade mark will better equip them to assist you in protecting your intellectual property rights.

4. Does Your Franchise Agreement Have a Confidentiality Agreement?

Make sure you establish a clear nondisclosure and confidentiality clause in your franchise agreements. Ensure that it addresses not only your intellectual property but also general business information including systems and processes, client databases and financial information and know how.

5. What are the Franchise’s Quality Standards?

Franchisors should take steps to monitor the franchisee’s adherence to the quality standards carefully. This is important in ensuring that the entire franchise system consistently adheres to the quality standards expected by the business’s loyal customers and clients. An operations manual to ensure quality control, compliance with requirements and standards should supplement a franchise agreement.

Key Takeaways

It is a franchisee’s responsibility to perform due diligence on the franchise model before entering into any agreement with the franchisor. Consider, however, that as most of the benefits you will acquire from the business comes from your intellectual property, it’s a worthwhile investment to understand what you can about your rights. If you have any questions, let our Intellectual Property lawyers know on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy