Franchisors allow Franchisees to use the trade name in the corporate name of the franchisee as this develops the trademark & brand equity.
Understanding the Franchisees
When a company wants to increase its market share or geographic reach at a low cost, it can franchise its product and its brand.
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. Sell the right to use your name and idea.
The franchisees purchase this right to sell the franchisor’s goods or services under an existing business model and trademark.
Product franchises and trade names
The product and trade name franchise is the license of a franchisee or distributor to sell or distribute a specific product using the franchisor’s trademark, trade name, and logo.
Product distribution franchise (traditional franchise)
The product distribution franchise, more properly called a traditional franchise, does not come to mind as often when most people think of a franchise, but it does have a much larger volume than the commercial format franchise. The reason is that the size of each transaction in traditional franchises is significantly larger than most commercial format franchise sales.
What is a traditional franchise?
In a traditional franchise, it is the products manufactured or supplied by the franchisor that take center stage, not the franchisor’s system of how the business should be conducted.
The manufacturer licenses the right to sell or distribute a specific product to the franchisee using the franchisor’s trademark, trade name, and logo.
Whereas in a commercial format franchise, the franchisee’s business is only known by the brands it shares with the franchisor and other franchisees, in a traditional franchise the franchisee is intended to have its own local identity.
Franchises and trademarks go hand in hand.
When you franchise your business, a primary legal right that will be granted to your franchisees is the license and right to use their trademarks. Franchisees will replicate your business model and, in doing so, use your trademarks.