How to use intellectual property to increase franchisor entity value

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The intellectual property (IP) components of a franchise are often the true lynchpins of entity value. After all, a franchisee is in essence purchasing an exclusive system to allow it to open and run a successful business. Franchise system IP often includes manuals, names, websites, patents, trademarks, along with common law rights. Protecting the system with proper IP planning, management, and protection, combined with portfolio management, ensures both entity value and long-term franchise sustainability. Careful consideration of an IP plan at the onset of starting a franchise and periodic systemic review of the current IP plan in an established system not only saves money, but often increases entity value and better ensures long-term franchise sustainably.

Below are some common planning and enforcement issues that are frequently associated with franchise IP:

  • Before deciding on a product or brand name, be sure to conduct trademark clearance searches to ensure that you will not run into issues using those brand names in the future. If you may expand internationally, consider conducting trademark searches in those countries in which you may expand. Consider how the proposed name translates into other languages and the ability to protect the translated name.
  • Plan for what you want to be five years from now and not what you are today. Even if you only have locations within a single state, consider filing a U.S. trademark on your brand or brands. Also, consider the possibility of expanding internationally and file for trademark protection in the countries in which you may expand.
  • Do not let others use your brand without a written trademark license. Doing so could ultimately lead to you losing rights in your brand or at least diminishing the value of it.
  • Consider signing up for a watch notice service. These services systematically search various sources, including the U.S. Trademark Office, and identify anyone that has filed a trademark application for a mark that may be similar to your mark. If you find someone applied for such a mark, take swift action. The sooner that you deal with this the better. If you let it linger, you may ultimately lose your rights in your brand or at least diminish those rights.
  • Obtain domain names that contain your brand correctly spelled and obvious misspellings or typos of your brand. Securing these may avoid issues in the future with others buying a domain name with your brand in it and trying to sell it back to you for a premium.
  • If you are going to utilize a website, be sure to include a privacy policy, terms of use, and make the site ADA compliant.
  • Develop a written branding guideline that includes the do’s and don’ts for using the brand, including any associated logos. Be sure to follow these guidelines and require others to follow them.

Because of the important place IP holds in the franchise system, work strategically with counsel to establish, maintain and enforce a robust IP plan. By utilizing different IP laws for specific purposes, not only do you often get more protection for the same dollars spent, you actually increase enterprise value.

To learn more about McDonald Hopkins Intellectual Property Department, click here or contact one of the attorneys listed below.

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