When you think of franchise brands, certain iconic images instantly come to mind—Grimace from McDonald’s, the Taco Bell Chihuahua, and of course, Colonel Sanders himself. These aren’t just lovable mascots that make you crave fast food—they’re valuable pieces of intellectual property (IP). But IP isn’t just about logos and brand names. It includes everything that makes a franchise unique, from secret recipes to signature slogans. That’s why franchisors need to think beyond the obvious and develop a solid plan to protect their IP from day one. Ensuring your IP is both available for use and properly protected is a foundational step in setting up a franchise system. This article guides new and established franchisors through important IP considerations.
Step 1: Ensuring IP is Available for Use
Before rolling out a franchise system, a new franchisor must confirm that the IP they intend to use is not only distinctive but also legally available. This involves:
- Conducting Trademark Searches: A comprehensive search should be conducted to confirm that the business name, logo, slogans, and even product names do not infringe on existing trademarks. The last thing a new franchisor wants is a costly legal dispute over a brand name after launching.
- Securing Rights from Creators: If third parties (e.g., graphic designers, marketing agencies, or product developers) created any IP elements, the franchisor must secure a clear right of use. Typically, this is done through an IP Assignment and Licence Agreement, ensuring the franchisor has full rights and can grant franchisees the ability to use the IP as part of the system.
Step 2: Protecting Your IP Through Registration
Once a franchisor confirms their IP is available, the next step is ensuring it is legally protected. Common strategies include:
- Registering Trademarks: McDonald’s is an excellent case study, having registered its name, golden arches, slogans like “I’m Lovin’ It,” and even the names of its products (Big Mac, McFlurry, etc.). New franchisors should adopt the same approach, registering names, logos, slogans, and even unique product names to prevent others from copying their branding.
- Considering a Separate IP Holding Entity: Many franchisors choose to hold their IP in a separate entity rather than the trading entity. This isolates valuable assets from operational risks, particularly franchisee claims or legal disputes. Prospective franchisors should assess whether this structure is right for them.
- Ensuring Registrability: Not all branding elements are inherently registrable. If a brand name is too descriptive (e.g., “Tasty Burgers” for a burger chain), it may be rejected. Franchisors should consult a trademark expert to ensure their marks meet the necessary criteria and don’t infringe on third-party rights.
Step 3: Planning for Future Expansion
An effective IP strategy isn’t just about the present; it must align with the franchisor’s long-term vision, including:
- Product Diversification: If the franchise may later introduce branded merchandise, such as clothing or accessories, it’s critical to register trademarks in those relevant classes from the outset. McDonald’s, for example, has protected its branding in categories beyond food, including apparel and toys.
- International Expansion: If global expansion is on the horizon, franchisors should consider filing international trademarks early. Countries have different trademark laws, and failure to register in key markets could lead to losing branding rights in those regions.
Step 4: Safeguarding Trade Secrets
Beyond trademarks and branding, franchisors must also protect their trade secrets, such as proprietary recipes, operational processes, and marketing strategies. Unlike trademarks, trade secrets are protected through confidentiality rather than registration. To safeguard these valuable assets, franchisors should:
- Require non-disclosure agreements (NDAs) for employees, franchisees, and suppliers.
- Implement restricted access to sensitive information, limiting exposure to only those who need to know.
- Develop robust confidentiality clauses in franchise agreements to prevent unauthorized disclosure.
KFC, for instance, has safeguarded its secret herbs and spices recipe for decades by keeping it under tight security and limiting access to only a few individuals. New franchisors should take similar precautions to maintain a competitive edge.
The Role of a Franchise Lawyer
Developing a robust IP strategy is complex, and franchisors should engage a franchise lawyer early in the process. A lawyer can:
- Conduct comprehensive trademark searches and filings
- Draft IP Assignment and Licence Agreements to secure usage rights
- Advise on structuring IP ownership to protect assets from liability
- Ensure compliance with domestic and international IP laws for expansion
Conclusion
Intellectual property planning is a non-negotiable step for new franchisors. Just as McDonald’s has safeguarded its name, logo, mascots, slogans, and product names, new franchisors must take proactive steps to secure, protect, and future-proof their brand. By ensuring IP is available, properly registered, and aligned with long-term business goals, franchisors can build a strong foundation for franchise success. Engaging a franchise lawyer early will ensure your brand assets remain protected as your system grows.