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What Franchisors/Franchisees Should Know About Trade Secrets and Proprietary Information?

It is important for any franchisor to understand trade secrets and to have a plan to protect these where necessary. The first step involves identifying trade secrets. Franchisors must be able to identify what trade secrets are with certainty. The operations manual on all of the information inside is not clear enough to identify trade secrets.

Trade secrets are any piece of information that gives you specific edge over your competitors and usually are things that the competitors do not know. This could include financial information, compensation, recipes, sales methods, evaluations for franchises, customer preferences, business plans, pricing techniques, sales forecast, distribution techniques and any proprietary software.

Bear in mind that as part of your franchise fee, your franchisor may be giving access to their logo or other proprietary information that would be classified as a trade secret. Your agreement may outline that there are certain things you can or cannot do with this material, so it’s in your best interests to be clear upfront about how you may use it. Violating this agreement could lead to legal action.

It is also important for a franchisor to understand the investment in every trade secret and how much work he or she has invested in cultivating these trade secrets. A unique system or method of doing things could be classified as a trade secret. Furthermore, it is important to understand the economic value of every type of trade secret.

A franchisor has to have tapped to gain some kind of importance or economic value from a trade secret. In the event that someone had ten years of experience prior to joining the franchise and continued to provide the same services to the company then it cannot be said that the company actually trained that individual for that particular role.

Make protecting trade secrets within your franchise a key priority for your entire business. List everything that makes up these trade secrets. It must be possible to identify every single trade secret in order to take the necessary steps to protect it. You also need to identify any development processes that are tied into the creation and distribution of that trade secret. Educating franchisees and employees on what constitutes a trade secret and the steps that they should be taking to minimize risks at all times is strongly recommended for a business owner.

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