Franchise Systems: Sustaining Brand Integrity, Authenticity, Value, and Reputation Is Not Solely A Legal Function!

Michael D. Moberly     December 29, 2011

A franchises’ brand and reputation are the driving forces that clients, stakeholders, and consumers recognize in the marketplace!  The intent here is to encourage franchisors to adopt a slight, but increasingly necessary shift in their business operating perspective from being solely market and margin driven, to being more protective of the intangible assets that drive those margins.

Examples of franchise system’s intangible assets include intellectual property, i.e., patents, trademarks, competitive advantages, trade secrets, brand, and reputation, etc., all of which are embedded in their products and/or services.

More specifically,  franchise safeguards and risk prevention/management initiatives should address each of the franchise’s unique and/or proprietary processes, designs, and business practices; achievable through consistent monitoring and oversight to ensure product – service integrity, authenticity, consumer confidence, and shareholder value are being sustained.

In some respects, franchise systems, at least in my view, have more at stake insofar as safeguarding and managing risks to their intangible assets than merely an obligation or fiduciary responsibility to…

  • identify each of their intangible assets, i.e., intellectual property, proprietary competitive advantages, and trade secrets. etc.
  • identify and assess the level of risk that exists in their market space globally to those assets and the attendant products and services.
  • put in place effective practices to mitigate those risks necessary to sustain control, use, ownership, and value of the franchise systems key proprietary assets.

Here are eight rules…

1.  Brand integrity and reputation involves more than mere legal protections and the presumed deterrents afforded through conventional intellectual property rights…

2.  If a franchises’ product-service (brand, reputation, etc.) has value and produces competitive advantages, be assured there are adversaries globally that will appropriate those assets, pay no royalties, and take the profits for their efforts…

3.  If franchisors and franchisees do not take proactive steps to safeguard their most valuable intangible assets contributing to the products and services they deliver, no one else will…

4.  If a franchisor waits to develop and execute a brand integrity program after one or more of its products/services (a.) have been misappropriated, (b.) its value eroded, and/or (c.) reputation (consumer confidence) diminished, it’s virtually certain the franchisor will lose and the adversary will gain…

5.  If a franchisor executes effective and consistent practices to safeguard and monitor its brand, authenticity, value, intellectual property, competitive advantages, reputation, and aggressively pursue misappropriators,  it’s likely would-be adversary’s will target competitors, not you…

6.  If a franchisor permits ‘different prices in different markets’ (for its products, services), be assured, someone already has, and will continue to ‘steal your profits’…

7.  A franchisors’ own products/services, in the form of gray market goods and counterfeits, are often its biggest, most active, and consistent competitor

8.  The safeguards and risk management initiatives designed to sustain control, use, ownership, and value for each product/service that a franchise delivers (owns) etc., is as important, as the promotional costs – resources used to market it!

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