Noncompetition Covenants: Protecting the Interests of Franchisees

This article is reprinted with permission from the September 2004 issue of Franchising World.

As we are all aware, in today’s world, intellectual property has great value. One need only hear the words Coca-Cola, Nike or McDonald’s to know instantly the concepts of market leadership, longevity and identification of products that those words convey.

All franchise systems strive to achieve the same kind of brand identity and spend a great deal of money doing so. And, having built the brand, the franchisor must act to preserve its integrity. Thus, a major part of the value delivered by the franchisor for the franchisee’s royalty fees is the brand identity and integrity.

Franchisees enter the system because they want to be associated with “the real thing” and not some imitation. The trademarks, service marks and trade dress are the principal elements of the brand identity that must be established and protected.