Covering confidentiality in a franchise agreement is both complex and crucial to get right, but Kate Matthews, partner at Boddy Matthews Solicitors, has some valuable legal advice
In any franchise, brand protection is key. Therefore, the objective of any well-drafted franchise agreement is to place obligations on all parties to maintain such protection. After all, the franchisor has worked hard to establish a proven franchise model to licence to its franchisees, while protecting its valuable trade secrets, registered and unregistered intellectual property rights, and goodwill.
The purpose of putting in place such protection is to prevent the disclosure of such secrets of success to competitors. The key to any successful franchise model is based on the sharing and exchange of sensitive and confidential information and data for its use for the benefit of the franchise brand while withholding it from third parties.
Define the scope
The scope of what confidential information is to be protected should be clear in the franchise agreement. First, it’s important to consider what confidential information or data means in the context of your brand and the industry in which it operates.
It can cover any confidential information and data (whether oral, electronic or in writing) relating to proprietary, technical, development, marketing, sales, operations, performance, costing, pricing, business processes, designs, ideas, concepts, inventions, technical know-how, and software as well as business relationships with employees, customers, suppliers and other third parties in the ordinary course of the franchise business.
Out of the public domain
The information or data must not be in the public domain in order for it to be confidential. However, the way in which information is communicated or packaged, even if individual elements are in the public domain, may make it confidential. It’s therefore important to ensure, when evaluating the definition of confidential information, that it remains applicable and current.
5 steps to protect your franchise brand
1. Ensure the definition of confidential information is clear and doesn’t exceed the purpose
2. Understand where confidential information may be found, such as the manual, systems, control, processes
3. Ensure all parties understand when they are handling confidential information and what they should do with it
4. Check if the franchise business requires a longer period of time following termination of any relationship to protect the confidential information
5. Ensure confidential information is protected in the hands of third parties where necessary for the franchise business and ask for the undertaking of nondisclosure clauses with similar confidentiality obligations.
Kate Matthews is a partner at Boddy Matthews Solicitors.