Role of a Franchise agreements and your growth strategy

By Wun Wenna

1 PLOT

Know what, or which parts of your business you wish to franchise.
Is it the product or what’s in it?
Is it the entire system or certain parts of the know-how? Are you franchising part of your business or all of your business? What are its selling points? What makes it different? Why would this be attractive to the franchisee? Will you be concurrently developing your product or a part of it, say its brand name? The answers to these questions (and more, this is not an exhaustive list) will help sharpen your focus on which aspects are fundamental to you, and those are likely to require protection. Either by law or by contract or both. For example, the intellectual property associated with your product and business (usually the trademark and trade names) you would want to retain, in order to protect against third parties’ and franchisee’s unauthorised use. Do assets need to be transferred for the successful running of business operations? How about training and marketing, how important are these? How will you transfer the skills required to run the franchise business? How much marketing is required? Can these be reduced to a standard operating manual, or are there parts which should not be shared? Establish what’s important to you, as franchisor. Deal with these issues in the Franchise Agreement. Make clear your stand. If the franchisee is not agreeable to the terms, better to know early than start a relationship and have to unravel further down the line.

 

02 TAKE A PAUSE

Know why you are franchising. Are you building, sharing or giving? Determine the nature of relationship with franchisees. What role does the franchisee play in your plan? Who needs who? To maintain a successful long term relationship, you will need to strike a balance. How much control? Who puts in the resources? Work out the numbers. Make this clear. Set pre-determined parameters, performance targets. Be realistic. When it’s time to part, part amicably. Consider post termination provision such as non-compete provisions. Know your options in each scenario, and make plans accordingly. Set the expectations right. Write all these in the agreement.

 

03 GOING PLACES
Staying local for now? There are no specific laws regulating the ongoing relationship between franchisee and franchisor. Depending on how you structure the relationship with the franchisee, certain legislation may regulate various aspects of franchising, such as the Multi-Level Marketing and Pyramid Selling (Prohibition) Act, Competition Act, Income Tax Act and Unfair Contract Terms Act. Crossing borders, you will need to think about the legal barriers
in each local market such as competition law, restraint of trade, foreign trade and investment regulations (e.g. China and Vietnam), double taxation laws and relief, specific franchisor/ franchisee regulations (e.g. US, Australia) and laws.

04 PLAN AHEAD

Get your structure right from the start. Plan, research and do your homework. Work out your sums. Know your product, and what you need to protect.

Write these in the Franchise Agreement. Start your Franchise Story. Right it.

Developing Your IP Strategy

Assuming your IP assets have been identified, the next step is to prioritize the importance of each asset.

Assets that generate or are likely to generate the most revenue or draw the most exposure should be given the highest priority.

Possible Strategies to employ:

  1. A defensive strategy, where the purpose of the IP owner is primarily to obtain exclusive rights and enforce these rights in case of infringement;
  2. An offensive strategy, where the purpose of the IP owner is primarily to gain a significant competitive advantage over identified competitors. For example, the IP owner will attempt to build an IP protection that will restrict the freedom to operate of its competitors;
  3. Commercialisation of IP assets, where the purpose of the IP owner is primarily to sell, license or franchise its IP assets. In order to effectively exploit IP the exists within a business, a sound IP strategy must be developed to support the business goals and objectives of the company and provide ongoing returns on investments.

Once the strategy has been identified, take the steps to implement and protect the IP within the company.

Finally, remember that IP protection is geographical in nature and there is a need to scan the countries the business intends to be in.

Some things you should check for are:

  1. Ensure you own the IP in the market
  2. Check if you are free to use your IP or if the IP belongs to another party.
  3. Where appropriate, invest in prior art searches or freedom to operate studies (for technical inventions), trademark availability searches (to check whether a name is available), legal audits or due diligence in order to ensure that the IP created by your company is duly assigned to your company;
  4. Whether adequate steps have been taken to protect your IP and confidential information in relation to your employees, contractors, clients and competitors;

There are specialised IP Lawyers that can advise in these areas.

Check on Accel8’s platform to seek out a lawyer specialising in this area of Ip Management.

What is Intellectual Property

The Importance of Intellectual Property

What is Intellectual Property

Intellectual Property is a basket of different rights.  There is no precise definition of “intellectual property” but it can be divided into the areas of trade marks, patents, copyright, database rights, designs and confidential information.

In the knowledge-powered economy of today, a company’s intangible assets, specifically their Intellectual Property (IP), are key determining factors of its worth. Billions are invested every year by companies such as Apple, Samsung, Google and Facebook in protecting, enforcing and managing their IP portfolios.

IP is today a leading asset class and is a key driver of economic growth and enterprise, knowledge of IP has become a necessity rather an option.

When a business is establishing its presence in the marketplace, protecting and managing its intellectual property is critical as it can mean the difference between success or failure. That is why it is important for businesses to understand the different forms of intellectual property because some involve a formal application and examination process before a right can be registered while others come into play without the need for a registration process. Below is a glossary explaining the various rights which businesses may find beneficial.

Confidential information

Confidential information is any information with restrictions placed on the communication or dissemination of that information.

Confidential Information deals with ‘know how’ and is difficult to prove, enforce and recover since the information typically resides with individuals. Unless it is very clearly put in written form, both marked clearly and understood as confidential

Obligations of confidence can arise under contract or under the general law. Duties under the general law may arise from a particular relationship (employer-employee) or where information has been received by a person who was aware, or should have been aware, that the information was confidential. Confidential information can be the most valuable asset of a business. The information can relate to any subject matter and be stored in any form. Examples include a new product design, a marketing strategy and software code.

Copyright

Copyright is the right to prevent copying (and certain other acts) in relation to works that qualify for protection. Copyright can subsist in literary, musical, artistic and dramatic works as well as original databases, sound recordings, films, broadcasts, cable programmes and typographical arrangements of published editions.

The duration of protection will vary depending on the work. For example, copyright in literary, musical, artistic and dramatic works, a film or an original database expires 70 years after the death of the author while in the case of sound recordings, broadcasts, cable programmes and typographical arrangements, the duration is 50 years.

Database right

The owner of the database right has the right to undertake or authorise others to extract or re-utilise all or a substantial part of the contents of a protected database. A database is protected where there has been a substantial investment in obtaining, verifying or presenting the contents of the database. This right is separate to copyright.

The duration of the database right is 15 years from the end of the calendar year in which the making of the database was completed or it was first re-utilised.

Designs

A design can be registered if it is new and has individual character. A design is “new” when nothing like it has been previously made available to the public and has “individual character” if the overall impression it produces on an informed user differs from that produced by a design which has previously been made available to the public.

A design can be registered (in Ireland or Europe) for a period of 5 years and then renewed, for periods of 5 years, to a maximum period of 25 years.

Patent

A patent gives the inventor the exclusive right, for a limited period, to prevent others from using his invention without permission. An invention is patentable if it is (i) novel; (ii) capable of industrial application; and (iii) involves an inventive step.

A full term patent is registered for 20 years. In Ireland, it is also possible to register a short term patent for 10 years. It is not possible though to hold both a full and short term patent for the same invention. Therefore, when both patents are granted, the short term patent will be deemed void.

Trade Mark

A trade mark is a sign that you can use to distinguish your business’ goods or services from those of other traders. Singapore uses the International Classification of Goods and Services, under the Nice Agreement, to classify trade mark registrations.

A trade mark can be represented graphically in the form of your company’s logo or a signature. Through a registered trade mark, you can protect your brand (or “mark”) by restricting other people from using its name or logo.

The period of protection is 10 years but a trade mark can be renewed indefinitely on payment of renewal fees.

Having a reasonable knowledge of intellectual property will help businesses to incorporate these assets into their planning and strategy.

 

Source: IPOS