Intellectual property considerations in franchising
In a franchising business, it is the reputation that plays a key role in determining the corporate identity of the franchisor in terms of the trade name, trade mark, copyright, service mark and company name.
Therefore, it becomes essential to ascertain that the franchisor is fully protected in this area. The following points should be taken into account before getting into a franchise business:
• If the franchisor is trading a company under the name which cannot be used as a trading name for another company, a third party may incorporate a company with a similar name. • However, this will not stop an existing unincorporated business using the same name as its trade name from making use of a passing off action, or a trademark infringement action in favour of a registered trademark, against the company using the same name in its corporate name.
Of course, merely banking on the reputation and corporate identity of the franchiso is not sufficient, one also needs to adopt a proactive and dynamic approach. Proper market research should be conducted before you set up a franchising business. It is sometimes better to consider buying an existing franchise to gain more profits as compared to a new franchise.