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Trademarks and franchises

On Behalf of | Mar 30, 2022 | Franchising |

As readers of this legal blog know, we often talk about franchises and trademarks, but seldom do we talk about them together. However, trademarks are inextricably connected to the franchisor-franchisee relationship. Indeed, Florida commercial business arrangements qualify as a franchise if three elements are met, which includes the use of a trademark or other commercial symbol. A franchise also includes a minimum payment (at least $500) within the first six months, and significant control or assistance with the operation of the franchise business.

The trademark element

At the heart of a franchise is the right to a business’s trademark to run that business, like to sell or distribute services, commodities or goods, which are identified by that business’s trademark. These are broad terms on purpose because a trademark can be an official trademark, but it can also be a trade name, service mark or marks, commercial symbol or some other advertising associated with the franchisor.

Ownership not required

One aspect that is often misunderstood about trademarks is that the franchisor does not have to own the trademark. The franchisor need only have the right to license the trademark.

Verbal contracts

Often, especially with newer franchisors, part or all of a franchise agreement may be oral in a so-called handshake agreement. However, purely oral agreements do not qualify as franchise relationships and cannot be enforced as such. This is because of the difficulty of enforcing such a complicated business deal without anything in writing. Though, for our Tampa, Florida, readers, the key here is only purely oral contracts do not qualify. Any written evidence of a contract can still be enforced, even if those writings are not signed, like invoices and purchase agreements.

Franchise law can become complicated quickly. This is because a business is bringing in another business to operate a piece of that original business. This intermingling can be profitable for both parties, but it can also be fraught with disagreements and potential litigation.