A question that has come up with some regularity regards the use of the franchise brand name in a franchisee’s legal name. Can an ‘ABC’ franchisee incorporate under the name ABC Kansas City, Inc.? No. The boiler plate (standard language) of most franchise agreements, prohibit the franchisee from incorporating or organizing using the franchise brand name.
There are practical and legal rationales for this standard franchise prohibition. Allowing a franchisee to incorporate or organize using the brand name can be one more issue for disentanglement when the franchise agreement expires or terminates. Further, the adoption of the brand name by a franchisee corporation or LLC can deflect from the Franchisor’s ownership rights to the trademarked brand name.
Even though franchise agreements typically prohibit franchisee’s using the brand name in their business entity name, MOST STATES DO REQUIRE REGISTRATION OF THE BRAND NAME as a fictitious, dba, or trade name. States refer to the filing using different nomenclature, but at the end of the day, if you are using a name other than your company name, you need to perfect a registration with the state as notification to the public.