A franchise is a type of trademark license. A franchise relationship exists when: (1) there is a trademark license; (2) a fee; and (3) the trademark owner provides significant control over the operation of the business. This control element exceeds the quality control requirement of a trademark license, which is to monitor only the quality of the goods or services.
Franchisors need to prepare a Franchise Disclosure Document (FDD) that provides financial information and other terms. We recommend having an attorney prepare it. Franchisors need to provide the FDD to potential franchisees at least 14 days before they make any payments.
The FDD discloses all trademarks, and if they are not registered federally, a prominent notice must be shown which would cause potential franchisees to not want to pay high franchise fees. The FDD also includes a Franchise Agreement that licenses the marks.
One aspect of a targeted branding strategy is the use of different taglines. A house mark is a trademark that appears across product and service lines. A product mark is a trademark that appears on a specific product or service. Taglines let prospective consumer know everything about your goods or services.
A tagline can indicate source just like a house mark or product mark, so they should be protected and searched like a house mark or product mark. But the luxury of a tagline is that it can be more targeted to the geographic market it is being used in. Consumers identify with their businesses through multiple trademarks. The franchisor should develop a trademark portfolio by working with its franchisees on what taglines resonate with consumers in their particular geographic markets.