Franchises as Moral Rights
38 Pages Posted: 19 Dec 2015
Date Written: 2014
Abstract
Imagine living the American dream of owning a small business, such as a franchise. Now imagine what it takes to keep that dream alive — the everyday operations of this fictional franchise location. There are inventory, customers, employees, products, and of course the franchisor to consider. At the end of the day, with all crises averted, the franchise becomes profitable. In fact, the business is a local sensation. The website also draws thousands of hits each week. Yet, upon the close of the franchise agreement term, the franchisor refuses to renew the contract. Suddenly, the brand name can no longer be associated with your business. Meanwhile, the franchisor has opened near your store a new franchise location where many of your once-loyal customers now flock. You receive a cease-and-desist letter regarding the use of the brand name on your website. It seems as if all of the work put into making the franchise location a success has been undone.
Conversely, imagine heading a company that spent years and millions of dollars to stake out a brand name. You seek to expand the brand name by franchising. However, one franchisee is frequently late paying royalties, and is only consistent in its disregard for quality standards. You decide that discontinuing the franchise relationship would be in the company’s best interest. Yet the former franchisee continues to use the brand name on its own website, ignoring a cease-and-desist letter. You fear the former franchisee could harm the brand’s reputation by association and thus feel compelled to take action through the court system.
These two stories are the backdrop of a typically unaddressed issue in U.S. franchise and intellectual property rights law: who owns the “intangibles,” such as goodwill and reputation? In this article, the nature of that inquiry leads to a proposal respecting law and theory while conforming to practical concerns: moral rights.
Keywords: Moral Rights, Franchise
JEL Classification: K00, K2
Suggested Citation: Suggested Citation