Franchise Name Change Disputes - What Are Your Rights?
Examine the Franchise ContractThe franchise contract is the starting point in the analysis. Usually it says if the franchise company decides on a system-wide brand name change, everyone in the network must abide. The cost of doing so (changing signage, printing new brochures, business cards, etc.) is normally left on the shoulders of the franchise owner. Welcome to "boilerplate that bites . . . and bites hard." Most franchise buyers are so emotionally involved and trusting when they sign on the line, they don't see this or many other red flags. Truth be told, this is not a topic raised by many attorneys representing franchise buyers either.
Examine the FDD Franchise Disclosure DocumentDon't forget to look at Item 13 of the FDD Franchise Disclosure Document. The FDD, which all franchise companies must give you before you buy their franchise, contains required disclosures about the franchise company, the investment and the franchise relationship. In Item 13, the franchise company is required to tell you what rights it has to the brand (mark) being licensed. If it doesn't have a federal registration with the United States Patent and Trademark Office, it must tell you this AND disclose certain risks that arise because it doesn't. The franchise company must also tell you if it knows of any superior prior rights or infringing uses of the mark that could affect you in your state. Depending on what was said (or not said) in Item 13, you may have significant rights.
FDD Disclosure ExampleFor example, let's say the name change is because the franchise company found out about someone else that has a federal registration on the name, and that this was not disclosed properly in Item 13 before you bought their franchise. All of a sudden, the franchise company has not properly and fully disclosed things and violations of state and federal franchise disclosure laws come into play. In some states, like California, violations of franchise disclosure laws give franchise owners rights to sue for damages and even rescission of the entire franchise contract.