Distinctive signs – including brands – are effective tools to improve business competitiveness and contribute to the development and growth of companies. One of these tools is the franchise.
A franchise is a license granted by the franchisor to the franchisee, permitting the franchisee to manufacture and/or sell a given product or otherwise provide services in a specific territory, complying with pre-established specifications and using operating, commercial and administrative methods (know how) established by the owner (franchisor) in order to preserve the quality, good name, and image of the products or services identified by the relevant mark.
The franchise allows the franchisor to strengthen its brand, increase sales, and enter new markets, both national and international. The franchisee will benefit from the franchisor’s brand positioning; however, brand positioning will actually strengthen both the franchisor and the franchisee, to the extent it will help increase sales of franchised products and/or services, for which the franchisor will receive
a royalty.
Without a brand there can be no franchise; that’s why it’s so important to have this asset properly protected.
Concerning brand protection, there are two systems in place: a) the constitutive system, and b) protection via brand use. The constitutive system is used in Peru to provide brand protection. In fact, brand protection is given to a brand owner that registers its brand at the competent office, in this case, the National Institute for Competition and Intellectual Property Protection (Indecopi).
Brand registrations last 10 years. Therefore, brand owners must apply for renewal in a timely fashion; there is a period of grace of 6 months counted as from the date
of expiration of the brand. Brand owners are not obliged to have their brands registered; however, if they don’t register their brands, they will not be able to prevent third parties from appropriating or using similar brands.
However, if a brand owner has its brand registered at Indecopi, the existing industrial property regulations afford it the following benefits: i) its products or services are identified in the marketplace, distinguished from those of competitors; and ii) it can take action against whoever uses its brand or a similar brand without authorization.
In addition, by having its brand registered at Indecopi, the brand owner is authorized to enter into different agreements, including a franchise agreement.
Brands can turn out to be valuable business assets because, in view that they are considered movable property, over time they can increase their market value. In addition, they are useful tools to compete in the marketplace, to the extent consumers tend to buy products or services which are identified by a distinctive sign as said sign provides greater confidence and safety.
There is a specific protection strategy for each brand, depending on how the brand will be used in the marketplace, the classes where it will be registered, which in turn depends on the products and/or services involved, and the territories where the brand is intended to be used.