November 2, 1998Legal Focus: Franchise
Protect franchise's distinctive elements
Richard Farrell
For those who want to franchise their retail-level business, creating a trademark, tradename and identifiable color scheme is one of the most important decisions potential franchisors can make.
And legally protecting that name, mark and color scheme is critical to the ultimate success of the franchise.
Your business already has a name. However, the name may or may not be suitable to what would be appropriate for an entire franchise network associated with the product or service they will be providing to the public.
Review the situation concerning your present tradename closely and critically. Do not stay with your existing tradename simply because you have used it for a long time. Your franchisees will not want to be part of just another run-of-the-mill marketing entity. They will want to be part of a distinctive name, mark and color scheme they can associate with their business.
Therefore, the first decision you will have to make is what your trademark and color scheme will be. There are several marketing graphics businesses in the community that can help you make these decisions.
Protecting the trademark
Once you have decided on your tradename, trademark and color scheme, the next step will be to begin the trademark/tradename registration process. Contact an attorney to assist you.The attorney will first perform a search of existing tradenames and trademarks to determine whether some other business already has them registered.
If so, you will have to move on to another alternative. It is critical that you complete the trademark and tradename registration process promptly and completely. You do not want to run the risk of having other businesses claim that you are violating their rights to their registered names or marks.
If this happens, the other business will be able to require you, and your franchise system, to stop using your name and mark. This could prove to be not only expensive, but possibly disastrous for you and your franchise network.
The "UFOC Business Plan"
The Federal Trade Commission (FTC) requires that every franchisor make certain fact disclosures to all potential franchisees. These disclosures will be made in your Uniform Franchise Offering Circular (UFOC) by providing answers to 23 questions prescribed by the FTC.
Although complying with the FTC disclosure requirements can be time consuming, the questions required to be answered in the UFOC present you with an initial outline for a "conceptual business plan."
A full set of the questions that you will have to answer can be obtained from the attorney assisting you in putting together the franchise.
Take your time to review each of these questions fully and prepare a first draft. You will see that supplying the UFOC information will prompt you to think about many aspects of your franchise that you have never thought about before.
As you go through the questions, you will see that several of them can be completed more fully by your attorney. However, even in the case of those questions, you should provide all of the factual information you can.
After you have completed your initial draft, you will find that there are some areas that will have to be addressed more exhaustively in order to reach decisions on some aspects of your franchise. Typically, decisions such as the amount of the franchise royalty percentage, franchisor's and franchisees' specific obligations and franchisees' initial investment amount, will require more extended discussion and decision-making.
The first draft for the UFOC responses will also give the attorney assisting you the factual information needed to prepare the final UFOC response.