A franchisor’s intellectual property can include (without limitation) the following:

• systems, manuals and know how;
• customer lists and databases;
• trade secrets and purchasing arrangements;
• patents, copyrights, designs, trademarks;
• computer programmes, computer code and systems, software, circuit board layouts; and
• fit out plans.

Intellectual Property Audit

Most franchisors don’t understand the value of their intellectual property or indeed, what their intellectual property comprises. As such, the first step is for an intellectual property audit to be carried out on the business.

Once the audit has been completed, appropriate steps can be taken to protect that intellectual property including preparation of confidentiality agreements, trade mark registration (both in NZ and overseas), design registration, insertion of copyright notices on documents and patent applications.

Structure

Ideally, the franchise system should be structured so that the intellectual property is safe from risk and is protected “to the max”. To do this, the intellectual property needs to be placed in a separate holding company from the franchisor trading company. We will refer to this company as the “IP Bunker”.

The IP Bunker licenses the intellectual property to the franchisor trading company on a no liability/no warranty basis. This means that if the franchisor is sued and is wound up, the IP Bunker can terminate the licence and create a new licence with another franchisor trading entity (who in turn can continue to support the franchisees).