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Protect Your Brand: Trademark Monitoring for Franchisors

franchise trademarks

Almost all franchisors own at least one federally registered trademark (and if they don’t, they should). As a general principle, brand owners are required to monitor and enforce their trademark rights in order to retain the exclusivity afforded by federal trademark registrations. This takes on additional complexities for franchisors—who need to make sure not only that no one is using their trademarks without authorization, but also that franchisees are making proper use of their marks.

For most companies, trademark monitoring is the task of examining the market for illegitimate, unauthorized, and otherwise negative references to a company’s trademarks. Potential threats can include:

  • Infringers (such as start-ups that have unwittingly adopted a similar name);
  • Counterfeiters (businesses that knowingly sell knock-off goods under your trademark); and
  • Dissatisfied consumers (who may take to social media to complain about your brand).

For franchisors, trademark monitoring also involves keeping tabs on use of the franchisor’s trademarks by its franchisees.

One of the fundamental components of a franchise agreement is a license for the franchisee to use the franchisor’s trademarks. With regard to this license, the franchise agreement will impose certain obligations and restrictions on how and where the franchisee can make use of the marks. Getting most franchisees to comply with these obligations and restrictions takes training and ongoing advisement.

When monitoring franchisees’ use of their trademarks, franchisors should look for:

  • LLC, corporation and trademark registrations in the names of franchisees (these should be prohibited by the franchise agreement);
  • Proper use of their trademarks (for example, referring to the franchised outlet as a “Pool Pro franchise”, and not “Pool Professionals”, and not saying “we are Pool Pros”);
  • Unauthorized domain names and social media accounts;
  • Appropriate use of advertising materials, company slogans, etc.;
  • Misleading advertising by franchisees; and
  • Consumer complaints from regions where franchised outlets are located.

Trademark monitoring is important for franchisors for several reasons. First and foremost, failure to monitor and enforce trademark rights can result in cancellation of the USPTO trademark registration loss of those rights altogether. Second, as alluded to above, trademark monitoring works to promptly identify and address infringers, counterfeiters and dissatisfied customers. Third, and specific to franchisors, franchisors owe a duty to their franchisees to make sure that their brand is protected. A big part of any franchise investment is the right to associate with the franchisor’s name and become immediately recognizable in the marketplace. If a franchisor loses control of its brand, this can have drastic effects for both the franchisor and its franchisees.

By effectively monitoring and enforcing their trademarks, franchisors can help ensure that their brands retain valuable, lasting and positive impressions in the marketplace.

Jeff Fabian is the owner of Fabian, LLC, a boutique intellectual property and business law firm serving new and established franchisors and franchisees. Contact the firm directly at 410.908.0883 or jeff@fabianlegal.com. You can also follow Jeff on Twitter @jsfabian.

This article is provided for informational purposes only, and does not constitute legal advice. Always consult an attorney before taking any action that may affect your legal rights or liabilities.

Franchisors Exposed to Liability Based on the Conduct of their Franchisees

Facts that have been considered relevant to whether a franchisor might be exposed to vicarious liability regarding the conduct of its franchisees include:

Chick-fil-A Wants You to Eat Less Kale?

Several other big-name corporations have been in the news recently for raising similar issues. Nike recently sent a letter to someone selling “Just Jesu It” t-shirts. Best Buy sent a letter to Geek On. Hell’s Angels sent a letter to a designer in California.

What is an Area Representative?

The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.