And while it may be considered “fictitious,” the value of the name is very real to the franchisor. So, when a franchisee says, “I need to register my d/b/a,” should the franchisor be concerned? Not with a proper understanding of fictitious name registration and a properly drafted franchise agreement.
Often it’s simply necessary that the franchisee register the fictitious name. Many if not most states require that fictitious names be registered. Violations can result in a misdemeanor, fines and other penalties, including losing rights to enforce contracts and file lawsuits. And aside from state law, many banks also require that the franchisee register the fictitious name before obtaining a loan.
But is the franchisor jeopardizing its trademark rights by allowing the franchisee to register the franchisor’s trademark as a fictitious name? Probably not. The state laws are generally clear that fictitious name registration does not on its own give the franchisee any trademark or other exclusive rights to the franchisor’s name.
On the contrary, a fictitious name registration serves some useful purposes for the franchisor. For one thing, it makes people think twice before using the fictitious name and – in this sense – protects the franchisor’s trademark. Perhaps more importantly, it points to the fact that, even though the franchisee is using the franchisor’s name, the franchisee is legally responsible for the business.
So what should the franchise agreement say on this issue? Of course, a flat-out restriction on fictitious name registration is a bad idea. So is complete silence.
The better approach would be to require the franchisee to register the fictitious name where required, such as in California, Texas and Florida, and to follow the franchisor’s instructions where registration is optional, such as in Mississippi. And, when it’s time for franchisor and franchisee to part ways, the agreement should have the franchisee cancel or change any fictitious name registrations.
Benjamin L. Mitchell: Law Elevated is a column on the latest trends, issues and perspectives facing the legal industry, written by associates of Butler | Snow
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