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Franchises

By: Jaime Israel Davila Gomez, attorney.

 israel@despachodavila.com.mx

 

The owner of a brand has multiple rights concerning his brand, however one of the most important is to grant licenses so that another person can use it in relation to the same products or services.

One type of license, perhaps the most interesting, is the franchise, since it also involves authorization to use a trademark, it involves the transmission of technical, administrative, financial knowledge as well as processes and all the experience acquired in the operation of a business. All of the above, known as “know how”, is transmitted for the sole purpose so that  the business of the brand owner can be  replicated in a uniform manner, so that the consuming public does not notice the difference between two businesses that operate with the same brand, but belong to different people.

The growth through franchising is a very interesting business model, because it allows the owner of the brand to grow without investing his own resources or neglecting the operation of businesses that are already in progress, and allows those who acquire it, have a business developed and tested, without the need to generate it, savings in resources and time that. In relation to intellectual property, there is always a tendency to concentrate on the aspect of trademarks, since it is the main object of the franchise: the authorization to use the trademark; however, most well-developed franchises have other intellectual property assets such as characters and characteristic drawings (copyright and rights reserves), or processes (which may be patents or industrial secrets). All these assets have to be “loaned” in the respective franchise contract and it is important that they are taken into account and legal security is generated for both parties, as they are part of that uniformity which was discussed.

In practice, most contracts are often very protective of the franchisor (who grants the franchise, which means authorizations and “know how”), because at the end of the day it is his effort and his assets that are being lent to another entrepreneur.

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