The value of trade marks

Franchising means different things to different people. Some people believe that franchising means sustainable and long-term business success with less risk.

Others buy a franchise because they want to be associated with a successful brand which itself provides the highest levels of quality. They are not wrong, but one of the keys to franchising is the ability to grant and accept the use of a trade mark.

And yet, we, and those great consultants at FDS, are constantly surprised by the number of would be franchisors who do not understand and therefor appreciate the value of obtaining trade mark protection for their brand. Those future franchisors are happy to live in hope that nobody will use a brand the same or similar to that which they use. They do not seem to realise that a trade mark registration is the property that incorporates the real value of the franchise system. Accountants call this “goodwill” and many say that it cannot be measured.

It CAN be measured and should be as it is used to calculate the reputation of the franchisor and is the “attractive force that brings in customers” to a business. The trade mark embodies the reputation that franchise owners want to buy into and certifies the quality of that good or service being sold and purchased. The use of a recognised trade mark becomes the guarantee that tells customers that there will be no surprises with this business – it will provide the same reliable goods, services and ambiance which they have come to expect from the brand, and thus restoration is essential to ensure that franchise owners have exclusive rights.

There are a number of advantages in owning a trade mark that is registered with the British Intellectual Property Office. A registered trade mark gives the owner the right to enjoy the exclusive use of that trade-mark in the UK, even if the mark will not be used everywhere in the country.

Also, trade mark infringement of a registered mark will be easier to establish than would be the case under a common law passing off action. The trade mark owner will be able to stop a third party that uses his brand and claim damages for doing so.

The future franchise owner should always check to see if a brand has been validly registered before buying a share in a franchise. Failure to conduct this basic due diligence will mean that the future franchise owner may not be able to register his interest in the trade mark should it not be registered. Basic due diligence on the part of the future franchise owner should include knowing the numbers of the trade marks, what they are registered for (goods and services), when the marks were registered, and if they are still registered. Any initial disclosure documentation will give this basic information.If the brand is not registered the worth of the franchise is nothing, and this is, perhaps, how much the future franchise owner should think about paying for part of that franchise.

Brand Protect is a specialist law firm that offers advice and assistance on all aspects of trade marks law and practice, especially those of concern to franchisors. With its breadth of knowledge, the firm is able to advise, not only on the creation of the intellectual property but also on how to retain it. Brand Protect regularly fights for the rights of franchisors in the courts and its clients rely on the firm to give them best advice on all aspects of IP law in this country and abroad.