One of the things that a franchisor has to offer a prospective franchisee is their brand. A strong brand name signifies built-in potential customers for the franchisee and their franchise establishment. Each franchisor must stipulate how its trademarks and proprietary information will be used within the confidential operations manual during the franchise term. In my opinion, it is much better to be upfront with this issue and address it in the franchise agreement prior to signing or exchanging money for the franchise business. It is for this reason that I developed a clause to include in our franchise agreement, which was a little different than most other franchisors. Below is a copy of that clause;

3.11.1 Property Rights

The Franchisee acknowledges the exclusive right, title and interest of the Franchisor in and to the Marks. The franchisee agrees that the service marks, the confidential operations manual and the system are the sole and exclusive property of the franchisor. Nothing in this Agreement or any other agreement shall grant Franchisee or others any right, title or interest in the Service Marks, the Confidential Operations Manual or the System as it exists or is developed. The franchisee’s license to use the service marks is non-exclusive. Franchisor, in its sole discretion, may operate under the Service Marks and may grant licenses to others to use the Service Marks on such terms and conditions as Franchisor deems appropriate. The franchisor may make reasonable efforts to protect the franchisee’s rights to use the service marks. In those states and nations where applicable, Franchisee agrees to execute, upon request, all documents necessary to register Franchisee as a registered user of the Service Marks.

Franchisee will promptly notify Franchisor of any infringement or challenge of its use of the Service Marks. The franchisor shall have the sole discretion to take or not take action, as it deems appropriate. If Franchisor assumes the defense or prosecution of any litigation involving Franchisee or any litigation involving Service Marks, Franchisee agrees to execute any and all documents and perform all acts and things that, in the opinion of attorney of the Franchisor, are necessary or advisable to carry out. the defense or accusation. This can be done on behalf of the franchisor or on behalf of the franchisee, as chosen by the franchisor. The franchisee will modify or discontinue the use of any franchise name or service mark, or use one or more substitute names or marks, if the franchisor so directs in writing at any time.

The sole obligation of the Franchisor in this case will be to reimburse the Franchisee for its tangible costs to comply with the instructions of the Franchisor (ie, the cost of changing signs, stationery, etc.). Under no circumstances will the Franchisor be liable to the Franchisee for any other damage, cost, loss, right or detriment related to any modification, interruption or substitution. All obligations or requirements imposed on Franchisee in connection with Service Marks shall apply with equal force to any modified or substituted name or mark.

The Franchisee shall not challenge, directly or indirectly: the property, title, right or interest of the Franchisor in the Service Marks, the Confidential Operations Manual, the Confidential Marketing Manuals or the System; or Franchisor’s exclusive right to register, use or license others to use the Service Marks, the Confidential Operations Manual, the Manuals and the Confidential Marketing System. The franchisee will not advertise or use the service marks without following the franchisor’s current guidelines and requirements. These may include, but are not limited to, affixing appropriate (C) or (R) copyright and registration marks, or the TM or SM designations, as applicable.

Any and all goodwill associated with the Service Marks, as it exists or is developed, including any goodwill that may be deemed to have arisen through the Franchisee’s activities, will accrue directly and solely for the benefit of the Franchisee. Franchisor, except as otherwise provided by applicable law. The Franchisee designates the Franchisor as its agent and proxy to amend or cancel any Registered User registration or Trade Name obtained by the Franchisee or on behalf of the Franchisee that involves or pertains to the Service Marks.

The franchisee acknowledges and agrees at all times and in all respects that the trademarks, trade names, service marks, patents, copyrights and all goodwill (local, regional and national) of the franchisor are sole and exclusive property of the franchisor. Franchisee also acknowledges that Franchisee is only licensed to use such rights and marks in accordance with the provisions of this Franchise Agreement and in strict accordance with the standards, specifications, and procedures outlined in the Confidential Operations Manual. The franchisee will not take any action that challenges or prejudices the exclusive right, title and interest of the franchisor in the trademarks, trade names, service marks, patents and copyrights. The Franchisee shall not represent that the Franchisee has any ownership rights in the Marks and the Franchisee acknowledges that the use of the Marks will not create in its favor any right, title or interest in the Marks, but that all uses will inure to the benefit of the franchisor. Neither the Franchisee nor any officer, director, agent or employee of the Franchisee shall register or attempt to register the Marks, whether inside or outside the Marketing Area, with any government or any other authority, nor dispute or impugn the validity of the Marks. , any registration or application to register any of the Marks, the rights of the Franchisor in the Marks, or the rights of the Franchisor to use the Marks or to grant licenses to others to use the Marks.

The franchisee must post and change the trademark notices and registration indications when and in accordance with the instructions of the franchisor. The Franchisee must assist the Franchisor to the extent reasonably requested in obtaining or maintaining any registration of any of the Marks to the extent reasonably requested, including by providing advertising samples.

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It is up to all franchisors to audit their brand and ownership information and decide how best to protect their value. It is recommended to discuss this at length, as it is money well spent with a competent, knowledgeable and experienced franchise attorney to devise better strategies to protect your franchisee business and its proprietary information. Consider this in 2006.