Trademark Attorney for Businesses About to Franchise: What to Fix Before the FDD Is Drafted

A trademark attorney for a business about to franchise makes sure the brand is searched nationally, federally filed or registered in the classes franchisees will actually sell in, owned by the entity that will sign franchise agreements, and licensed with real quality control. That work comes before the disclosure document, and at Citrus Legal it starts with Seed, a flat-fee $650 clearance search with a written opinion.

Franchising turns your name into the product. A buyer isn't paying for your equipment list. They're paying to open under a name customers already trust, which means every weakness in the trademark becomes their problem too, and the federal franchise rule makes you tell them about it in writing.

I covered the basics for studios in the article on second locations and franchising. This article is about what a franchise-bound business of any kind should have checked first. I'll use a fictional self-serve dog wash, Halyard Pet Wash, with three company-owned locations in Tampa.

What a trademark attorney checks before you franchise

Whether the name is clear in markets you haven't entered yet. A trademark registration gives nationwide priority from your filing date, but it doesn't erase someone who was using a similar name before you filed. The statute protects that earlier user "only for the area in which such continuous prior use is proved," which means a dog wash with the same name in Phoenix could keep its territory. That's exactly where a franchisee might want to open. A search for a franchise brand has to cover the whole country, not just the counties you operate in. I wrote more about where earlier users stand in the article on prior user rights.

What Item 13 of the disclosure will say. The FTC's franchise rule defines a franchise partly by the trademark: the franchisee gets the right to operate a business "identified or associated with the franchisor's trademark." It then requires a disclosure document with numbered items. Item 13 covers trademarks. It requires you to identify each principal trademark licensed to the franchisee and state whether it's registered with the USPTO.

If the principal mark isn't on the Principal Register, the rule prescribes a warning that starts, "We do not have a federal registration for our principal trademark." It goes on to tell the buyer the mark doesn't have many of the legal benefits of a registered one and that they may have to switch to another mark if your rights are challenged. That paragraph is in front of every prospect who reads your disclosure. It's much better to have a registration, or at least a filed application on a searched name, before it's drafted.

Whether the franchisor entity owns the mark. Halyard has three LLCs, one per location, and the founder filed the trademark application in her own name. The franchise agreements will be signed by a new franchisor company. That's three possible owners and a fourth entity doing the licensing. The franchisor should own the mark, or have clear written rights to license it, before it promises franchisees the right to use it.

Moving the mark takes a written assignment, and federal law requires it to go with the goodwill of the business. There's a timing trap, too. If the founder's application was filed on an intent-to-use basis and use hasn't been shown yet, it generally can't be assigned except to a successor to the ongoing business it belongs to. An improper assignment can void the application. I explained the assignment rules in the article on selling a trademark.

Whether the license has quality control in it. Trademark law treats franchisees as related companies, and their use counts as yours only because you control "the nature and quality" of the goods or services. A franchise agreement that hands over the name with an operations manual nobody enforces is a risk to the mark itself. Licensing with no real control can be treated as abandonment, and a registration can be cancelled on that ground. The franchise agreement, the brand standards and the inspections you actually do are what keep the mark yours. More on that in the article on licensing with quality control.

Whether the name can travel. Names built on a place or a description work for one location and fight you at fifty. If Halyard had named itself after its neighborhood plus the words dog wash, that name would mean little to customers in another state, and it would be hard to register in the first place because it describes where and what. If the name has that problem, the time to find out is before you print a franchise sales brochure with it on the cover.

The classes

A franchise brand needs classes for what the franchisees sell, plus the franchisor's own service.

• The franchisee's service class. For Halyard, pet grooming and washing is in Class 44, which covers hygienic and beauty care for animals. A restaurant concept would be Class 43, a fitness concept Class 41.
• Goods sold at the locations. Branded shampoos, treats or apparel each sit in their own goods class, and each needs proof of use as a product.
• Class 35, the business management class, is where franchisors often describe the support and assistance they give franchisees.

The USPTO base application fee is $350 per class. Filing in the right classes matters for Item 13, because the registration you disclose should cover what franchisees will actually do under the name.

When to hire, and what it costs at Citrus Legal

Hire before you engage franchise counsel to draft the disclosure, and well before you talk to prospects. A federal application can take many months to reach registration, and the disclosure has to describe the mark as it stands. Starting the trademark work first gives the registration a head start and keeps the ownership cleanup out of the franchise deadline.

Seed is a $650 clearance search with a written opinion. Grove is $2,600: the search, the opinion and the federal application, with procedural Office Actions included. USPTO fees are separate, $350 per class. The franchise disclosure document itself, state franchise filings and the franchise agreement are separate legal work that I don't cover here.

You can see every flat fee on the all services page, and the FAQs page answers most of what comes up before a first conversation.

Questions about your name? Email us at hello@citrus.legal, or book a paid 30-minute consultation (opens in a new tab) for advice on your specific situation.

Sources

• 16 C.F.R. § 436.1(h), FTC franchise rule definition of franchise (Cornell LII): https://www.law.cornell.edu/cfr/text/16/436.1 (opens in a new tab)
• 16 C.F.R. § 436.5(m), Item 13 trademark disclosure (Cornell LII): https://www.law.cornell.edu/cfr/text/16/436.5 (opens in a new tab)
• 15 U.S.C. § 1115(b)(5), limited-area defense for earlier users (Cornell LII): https://www.law.cornell.edu/uscode/text/15/1115 (opens in a new tab)
• 15 U.S.C. § 1060(a), assignment with goodwill and intent-to-use limits (Cornell LII): https://www.law.cornell.edu/uscode/text/15/1060 (opens in a new tab)
• 15 U.S.C. § 1055 and § 1127, related companies and abandonment (Cornell LII): https://www.law.cornell.edu/uscode/text/15/1127 (opens in a new tab)
• USPTO fee schedule, base application fee $350 per class: https://www.uspto.gov/learning-and-resources/fees-and-payment/uspto-fee-schedule (opens in a new tab)

This article is general information, not legal advice. Reading it does not create an attorney-client relationship.