Intellectual Property Protection – a Warning for All Franchisors!

There comes a point when a business is so successful the owner decides to branch out into new markets. This can happen in two ways. One, they open new locations of their own. Two, they allow people to license the use of the brand and business model.

The second is referred to as franchises, and the owners are franchisees. Franchising gives you financial advantages without the stress of actually operating the business.



With this proposition comes several risks. People investing in the business through licensed franchises must mirror your brand. This is where intellectual property protection comes into play.

The brand is the company's reputation. Anything that takes place under the brand name reverts back to the corporation. For this reason, there are strict stipulations when people invest in businesses of major companies.

Have you built a brand that is prime for expansion? Keep reading to learn more about how to protect intellectual property when offering franchise opportunities.

What is Intellectual Property Protection?

In technical and legal terms, intellectual property protection falls under the following categories:

Copyright

Copyrights protect your intellectual property at risk of being infringed upon. This includes creative works in written and art forms. For a business, this could be your business plan or a restaurant menu.

Patents

Patents protect is granted by the government and gives someone rights to their inventions that solve an industry problem. For example, a technology designed to make a process easier cannot be claimed by someone else.

Trademarks

Trademarks protect your business name, logo, and tagline. It is the number one way to protect your brand.

Trade Secrets

When you hear about McDonald's special sauce or KFC's secret recipe, these are perfect examples of trade secrets. It is what makes your product or service different from everyone else.

There are a few more but these are the most commonly used protections. Before you can begin to think about franchising, first protect your business concept and brand. After you have done this, there are other steps to ensure franchisees do not harm your band.

Define Your Objectives

Once you have your intellectual property protection in place, you'll need to define objectives for your franchisees. What are your goals? Is it to move into new markets or make money to reinvest in business ideas?

Having objectives will help control growth.

Develop a Screening Process

A screening process goes a long way to build and protect your brand. These are guidelines franchisees must meet in order to be considered for a franchise. Their purpose is to weed out individuals who are not strong contenders.

Set stipulations on things like:

• Access to capital
• Business experience
• Credit score
• Criminal Background
• Education level

You will need to apply these standards across the board to avoid claims of discrimination. In the end, you want people that will best represent your brand.

Set Your Franchise Fees

Franchises come with different fees. These are in addition to the investment cost the franchisee will incur to get the business up and running. 

The fee has to be at a cost that is reflective of your business stature. 

Franchise Fee

Range from a few hundred dollars to well into the thousands. This is the initial investment in the process of owning a franchise.

Investment Fee

This is the money required to get the business up and running. Investment fees include business location, signage, hiring, and much more.

Royalty Fees

Royalty fees are the amount the franchisee will pay each month. The amount can be a flat rate or a percentage based on sales volume.

Target Your Locations

To build and protect your brand, you want to be strategic in the locations. This is important for businesses that are similar to other brands. If there is a market already saturated with the product or service you offer, it may not be financially sound to have a franchise there.

Moving into new markets across the country will require special consideration. Also, there is the demographic, socio-economic status of your clients, and employment laws.

If you are unable to monitor the activity of your franchises you could be setting yourself up. The lack of oversight makes it easy for someone to misuse your brand. This in turn places your business at risk.

Hire a Franchise Attorney

When creating the blueprint for your franchises hire an attorney to help you draft contracts and user agreements. Getting paperwork in order is how to protect intellectual property and limit legal liability.

Once your legal team has worked out all the formalities, you're almost there. Next, locate a franchise outsourcing firm to find the right franchisees. 

Create Performance Goals

Although you will not be overseeing the day-to-day operations of the franchise, you still need to set goals. These metrics must be included in contracts. Also include stipulations on remedies for missing objectives.

This could include financial penalties or even revoking the franchise license.

Engage With the Franchises

Inspect what you expect. Franchising your business means continuing the culture you've created. Engagement can include brand conferences, mandatory site visits, or continuous training for owners and employees.

Don't shy away from surprise visits. You don't have to be an Undercover Boss, but you do need checks and balances. 

Be Prepared to Close or Takeover a Franchise

Intellectual property protection requires an end game. There is the unfortunate possibility of a franchise struggling. Or it can have an issue that causes a negative impact on the brand.

In these instances, you'll need a plan that gives you the right to close, buy out, or take over a franchise. 

Is It Time to Expand Your Brand?

Intellectual Property Protection is more than the legal aspects. It also goes to the integrity of your core values. 

When you're ready to take that leap, you'll want a partner to help guide you through the process. Franchise outsourcing is designed to help emerging brands expand into new markets.

Click here to schedule a consultation and get on the path to success.