Know-how licensing and “franchise light”

A licence permits the use of certain rights — for example a trade mark, software, content or methods — within specified limits. Transfer of know-how involves describing and protecting practical knowledge. Franchising is a system of continuing collaboration in which the franchisor grants the right and imposes the obligation to operate the business according to its concept.

Government Ordinance No. 52/1997 includes requirements concerning intellectual property rights, initial training, assistance, the pilot unit and pre-contractual disclosure. The actual structure must be compared with those elements.

For a replicable concept, the agreement is only one of the documents required.

• Description of the licensed rights and evidence of ownership.
• Operations manual, versions, updates and controlled access.
• Territory, channels, exclusivity and performance conditions.
• Initial fee, royalties, marketing contributions and audit.
• Training, assistance, support and responsibility for local decisions.
• Quality standards, inspections, remediation and reputation protection.
• Confidentiality, non-use and return of know-how.
• Termination, de-branding, stock, customers and post-contractual obligations.

An overly brief model can leave the principal asset unprotected: the working method itself. At the other extreme, excessive control over prices, suppliers, territory and operations may raise competition concerns or demonstrate that the relationship is closer to a franchise than a simple licence.

The trade mark must be checked before replication, and manuals and confidential information must be subject to genuine access, version-control and withdrawal measures.

Before drafting, the assets that make the model replicable must be inventoried.

• The trade mark, logo, domains and other intellectual property rights.
• Manuals, procedures, recipes, software and training materials.
• Results from the pilot unit or project.
• The financial model: fees, royalties, marketing and investments.
• Mandatory standards and areas in which the partner remains independent.
• The expansion plan, territories and selection criteria.