Do You Lose the Right to Use a Trademark When a Franchise Agreement Expires?

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Introduction: The Agreement Has Expired… Does Your Right to Use the Trademark Expire Too?

You may invest your money in opening a branch under a well-known brand, covering the costs of preparing the premises, hiring employees, marketing, and building a customer base that has become accustomed to dealing with your business. Over time, the brand name becomes an essential part of your business’s value, and customers begin to associate the quality of its products or services with that name.

But what happens when the franchise agreement expires? Can you continue using the trade name and logo because you paid franchise fees and invested money in operating the branch? Or must you stop using the trademark as soon as the contractual relationship ends?

The answer depends on the rights granted under the franchise agreement, ownership of the trademark, the terms governing the expiration of the agreement, and the applicable legal provisions.

In Saudi Arabia, the Franchise Law addresses this issue directly. Article 22 provides that the assignment, termination, expiration, or non-renewal of a franchise agreement results in the expiration of the agreement relating to the use of the trademark or trade name associated with the franchise business, subject to the procedures specified in the Implementing Regulations.

Official Source: Saudi Franchise Law

This means that the expiration of a franchise agreement is not merely an administrative matter. It may bring about a fundamental change in how the business operates and presents its commercial identity, even if the franchisee has built a successful business during the term of the agreement.

To understand this issue correctly, it is essential to distinguish between trademark ownership, the right to use a trademark under a license, assets independently created by the franchisee, and obligations that continue or end when the agreement expires.

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First: Who Owns the Trademark Under a Franchise Agreement?

To understand what happens to a trademark after a franchise agreement expires, you must first identify who owns it and the legal nature of the rights granted to the other party.

In a typical franchise arrangement, there are two parties: the franchisor, who grants the other party the right to operate a business according to a specific commercial model, and the franchisee, who operates the business under the agreed terms.

The franchise may include the right to use the brand name and logo, benefit from the operating system, use marketing materials, access technical expertise, follow operating manuals, and use other elements that distinguish the business.

However, granting the franchisee the right to use a trademark does not necessarily transfer ownership of that trademark.

What Is the Difference Between Trademark Ownership and a License to Use It?

Trademark ownership: This means holding the rights associated with the trademark under applicable law, allowing the owner to exercise the rights granted by the law, including licensing others to use the mark within the permitted limits.

Trademark license: This is permission granted to another party to use a trademark under specific conditions, such as the duration of use, permitted business activities, geographic scope, quality requirements, and other agreed terms.

Article 33 of the Saudi Trademark Law permits a trademark owner to license a natural or legal person to use the mark for all or some of the goods or services for which it is registered, subject to the applicable legal provisions governing the license and its duration.

Therefore, if the franchisee uses a trademark owned by the franchisor under an agreement, paying franchise fees or covering operating costs does not, by itself, transfer ownership of the trademark.

You can consult the Saudi Trademark Law to review the provisions governing trademark licensing.

Practical Example

Suppose an investor obtains a franchise to operate a restaurant under a recognized brand. The investor pays the franchise fees, prepares the premises, hires employees, and spends money on advertising campaigns.

During the agreement, the investor is entitled to use the trademark within the limits of the license and contract. However, once the agreement expires, the investor cannot rely solely on the money spent to claim that the trademark has become their property.

Trademark ownership is different from ownership of the restaurant’s equipment, furniture, and other assets. It is also distinct from any rights that may arise under the franchise agreement or applicable laws.

For this reason, each right should be assessed separately, without confusing investment in the business with ownership of its commercial identity.

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Second: What Happens to the Trademark When a Franchise Agreement Expires?

Under Article 22 of the Saudi Franchise Law, the assignment, termination, expiration, or non-renewal of a franchise agreement results in the expiration of the agreement relating to the use of the trademark or trade name associated with the franchise business.

Accordingly, a franchisee should not assume that the right to use the trademark continues after the agreement expires simply because the mark was used lawfully during the contractual term.

It is important to determine the date on which the relationship ends, review any separate agreements or existing licenses, and verify the legal procedures required to end the license.

Article 13 of the Implementing Regulations of the Franchise Law provides that if the agreement relating to the use of the trademark in the franchise business is no longer in force because the franchise agreement has been assigned, terminated, expired, or not renewed, the franchisor must notify the Saudi Authority for Intellectual Property.

You can consult the Implementing Regulations of the Franchise Law for the relevant provisions and procedures.

Can the Franchisee Continue Using the Brand Name and Logo?

A franchisee should not continue using the trademark after the right to use it has expired unless there is a legal basis authorizing that use.

This may include displaying the logo on the business premises, using the brand name in advertisements or digital accounts, including it in product lists or packaging, using it in promotional materials, or using it in any way that suggests the business remains affiliated with the brand.

Removing the logo from the storefront alone may not be sufficient if other materials continue to suggest to the public that the business still operates under the brand.

At the same time, any independent right claimed by the franchisee must be assessed, such as a separate license that remains valid or a subsequent agreement permitting certain uses. The outcome depends on the actual documents and the scope of the rights they grant. No exception should be assumed without verification.

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Third: Are You Entitled to Keep the Customers You Acquired During the Franchise Term?

This is one of the questions that frequently concerns business owners. An investor may spend years building a customer base, improving services, and developing commercial relationships, only for the franchise agreement to expire.

The key is to distinguish the commercial relationship with customers from the right to use the trademark.

The expiration of the right to use the trademark does not automatically mean that every independently created asset belonging to the franchisee becomes the property of the franchisor. Conversely, owning or managing a customer base does not entitle the franchisee to continue using the brand name or logo without authorization.

Several issues should be reviewed, including:

• What does the agreement say about customer data and databases?
• Does the agreement contain confidentiality obligations?
• Who owns the digital accounts created during the franchise term?
• Are there contractual restrictions on using customer data or contacting customers after the agreement expires?
• Are there independent rights relating to marketing content, photographs, or other materials created for the business?

There is no single answer that applies to every situation. The outcome may depend on the wording of the agreement, the nature of the data, the relevant laws, and the rights of each party.

Illustrative Example

If a franchisee created a social media account under the brand name, ownership of the account and the ability to retain it after the agreement expires must be assessed by reviewing the agreement, the platform’s terms, and the rights associated with the name, logo, and content.

It should not be assumed that the account belongs to the franchisee simply because they created it or managed advertising campaigns through it. Likewise, it should not be assumed that everything published or produced during the relationship automatically transfers to the franchisor without examining the relevant agreements and rights.

For this reason, ownership of accounts, data, and marketing content, as well as the procedures for transferring or handing over their management, should be addressed when the franchise agreement is signed rather than left until the relationship ends.

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Fourth: Can You Change Your Business Name After the Franchise Agreement Expires?

A franchisee may wish to continue operating the business after the agreement expires but under a different trademark. In principle, this may be possible, but implementing the change requires consideration of intellectual property rights, contractual obligations, and other legal requirements.

Changing the name does not necessarily make all elements of the previous brand identity available for use. The logo, designs, marketing slogans, visual materials, operating manuals, and other potentially protected elements must also be reviewed.

What Should You Review Before Launching a New Brand Identity?

1. The new trade name and trademark: Check whether the proposed name is available, review relevant registered trademarks or applications, and take the necessary steps to protect the new mark if it meets the applicable requirements.
2. The logo and designs: Ensure that the new identity does not reproduce protected elements belonging to the franchisor or create confusion about the former business’s relationship with the original brand.
3. Marketing materials: Review photographs, videos, templates, manuals, and content produced during the franchise term. Determine what may be reused after expiration under the relevant agreements and rights.
4. The website and digital accounts: Organize the transition to the new name and update information that could suggest the franchise relationship is still active, while considering ownership of accounts, data, and related obligations.
5. Supplier and customer contracts: Continuing under a new brand may require updating certain agreements, commercial information, or relevant licenses, depending on the nature of the business.

Most importantly, avoid adopting a new identity that is so similar to the previous brand that it could mislead the public or infringe the owner’s rights. Simply changing the written name does not, by itself, establish that using the other elements of the identity is lawful.

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Fifth: What If the Franchisor Refuses to Renew the Agreement?

A franchisee may wish to renew the agreement when its term ends, particularly if the business is performing well and has established a loyal customer base familiar with the brand.

However, the desire to renew does not mean the agreement will automatically be renewed in every case. The agreement, renewal and extension provisions, required notices, and applicable legal rules must be reviewed.

The Saudi Franchise Law regulates certain circumstances in which an agreement may be terminated or not renewed and establishes rights and obligations relating to the end of the contractual relationship.

It is important to distinguish between three situations:

• Expiration at the end of the contractual term: Rights and obligations are determined by the agreement and the applicable legal provisions.
• Early termination: This is subject to the conditions, grounds, and procedures established by the law and the agreement.
• Non-renewal: The consequences depend on the circumstances and the applicable provisions.

The provisions of the Franchise Law concerning the end of a franchise agreement address the parties’ rights and the consequences of expiration or termination, including circumstances in which compensation or other obligations may arise.

Therefore, if the franchisor refuses to renew the agreement, the franchisee should review the contract before assuming that the refusal is unlawful or that compensation is automatically due. The franchisee should also determine when the trademark license ends and develop a practical plan to transition to a new identity or discontinue the business.

You can consult the Saudi Franchise Law published by the Bureau of Experts at the Council of Ministers to review the relevant provisions.

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Sixth: Are You Entitled to Compensation for the Money You Invested in the Brand?

A franchisee may spend substantial amounts on preparing the premises, advertising, employee training, improving customer experience, and operating the business. When the agreement expires, the loss of the right to use the trademark may feel like a loss of the investment’s value.

However, the expiration of a trademark license must be distinguished from entitlement to compensation for losses or expenses.

The expiration of a franchise agreement does not, by itself, mean that the franchisee is entitled to compensation. Nor does it mean that every amount invested has legally been lost. Financial rights depend on the circumstances in which the relationship ended, the reasons for termination or non-renewal, the terms of the agreement, and the applicable legal provisions.

Separate issues may warrant examination, including a breach of contractual obligations, termination without lawful grounds where the law requires otherwise, or losses that can be proven in accordance with applicable legal requirements.

The Franchise Law also addresses certain financial consequences arising from the end of an agreement, including specific circumstances involving physical assets used exclusively in the franchise business, subject to the prescribed conditions and procedures.

For this reason, franchisees should retain invoices, fit-out contracts, expense records, correspondence, and notices relating to termination or non-renewal. These documents can help assess the situation, but they do not establish an entitlement to compensation unless the relevant requirements are met.

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Seventh: How Can You Protect Your Trademark Rights Before Signing a Franchise Agreement?

Effective protection begins before the agreement is signed, not when it expires. The clearer the rights and obligations are from the outset, the lower the likelihood of disputes over the trademark when the relationship ends.

The following points deserve particular attention:

1. Verify Who Owns the Trademark

Do not rely solely on the brand name visible to the public. Request clear information about its owner, and verify the relationship between the franchisor and the owner if the franchisor is not the registered owner.

The Franchise Law requires the agreement to address the franchisee’s rights to use the trademark and other intellectual property rights. It also requires information about the owner of the trademark or trade name and, where applicable, the relationship between the franchisor and that owner.

2. Carefully Review the Trademark Use Clause

The agreement should clarify the permitted scope of use, the products or services covered, the geographic area, the license duration, restrictions relating to marketing and advertising, and obligations concerning the brand’s identity.

It is also important to understand what happens when the agreement expires, how use must be discontinued, and how promotional materials, storefronts, and digital accounts will be handled.

3. Define Your Rights in the Assets You Create

If you will produce marketing content, design advertising materials, develop a website, or create a customer database, it is advisable to specify ownership and usage rights for these assets in the agreement.

Paying for production does not necessarily settle every intellectual property ownership issue. Rights may depend on the nature of the work, the contracts, and the applicable laws.

4. Agree on Transition Procedures for the End of the Agreement

The agreement should address the practical steps required when the relationship ends, such as removing the trademark from the premises, stopping advertising campaigns, updating digital accounts, and handing over materials or information that must be returned under the contract.

It may also establish a clear process for resolving disputes relating to the trademark, content, or confidential information.

5. Obtain a Legal Review Before Committing

Having the agreement reviewed by a professional specializing in intellectual property and franchising can help identify clauses that may affect your investment, clarify the scope of the rights granted, and explain which obligations may continue after the agreement expires.

The goal is not to eliminate every risk, but to understand those risks before signing and making an informed investment decision.

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Eighth: What Mistakes Should You Avoid After a Franchise Agreement Expires?

When an agreement expires, a franchisee may try to continue operating in the same way until a replacement is found or delay removing the brand from certain marketing channels. Such actions may lead to legal disputes if the use continues without authorization.

Common mistakes to avoid include:

• Continuing to use the logo temporarily without permission: Even if the aim is to retain customers, the expiration of the license requires reviewing any remaining rights rather than assuming permission continues.
• Assuming franchise fees grant ownership of the trademark: Fees paid for the agreed rights and services do not automatically transfer trademark ownership.
• Reusing operating manuals and content without reviewing the rights: These materials may contain protected elements or confidential information subject to specific obligations.
• Ignoring digital accounts: Review account ownership, rights to the name and logo, and obligations relating to data and content before transferring or changing them.
• Launching a new brand that closely resembles the previous one: Depending on the degree of similarity and the circumstances, this may confuse the public or lead to an intellectual property dispute.
• Discarding documents after the relationship ends: Retain the agreement, correspondence, notices, invoices, and other documents needed to establish rights and obligations.

The best approach is to prepare a checklist of required actions before the agreement’s expiration date and implement it according to a clear schedule. Seek professional advice if there is a dispute about the scope of permitted use or any remaining rights.

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Ninth: Can Certain Intellectual Property Rights Continue After the Agreement Expires?

Yes. Certain rights or obligations may continue after a franchise agreement expires, but this does not mean that the right to use the trademark automatically continues.

For example, obligations relating to the confidentiality of business information, settlement of outstanding payments, handling of data, delivery of certain assets, or resolution of disputes arising during the agreement may remain relevant. Whether each obligation continues depends on the nature of the right, the contractual terms, and the applicable legal provisions.

Intellectual property rights are also not all the same. Trademarks differ from copyright, and both differ from trade secrets and technical know-how. Each has its own nature of protection and applicable requirements.

A franchisee may have created content, designs, or other materials during the contractual term. In such cases, it is necessary to identify the rights holder, determine whether the agreement grants the other party a license to use those materials, and establish whether that license continues after the relationship ends.

Similarly, if the franchisee obtained confidential information through the business relationship, the expiration of the agreement does not mean that all such information becomes freely available for use. The confidentiality obligations, the nature of the information, and whether it qualifies for legal protection should be reviewed.

For this reason, ending a franchise agreement requires a comprehensive review of the rights associated with the business, not merely removing the name and logo from the premises.

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Conclusion: Franchise Expiration Does Not Transfer Ownership of the Trademark or Automatically Preserve the Right to Use It

When a franchise agreement expires, the right to use the trademark associated with the franchise ends in accordance with Article 22 of the Saudi Franchise Law, subject to relevant legal procedures and provisions and any independent rights that may require verification.

Investing money in the business or building a customer base does not automatically transfer trademark ownership to the franchisee. At the same time, the expiration of the agreement does not necessarily eliminate all the franchisee’s rights in other assets that they independently created or own.

Effective protection begins with carefully reviewing the agreement before signing, verifying trademark ownership, defining rights in content, data, and digital accounts, and understanding the procedures required when the relationship ends.

If the agreement is approaching expiration or a dispute has arisen over continued trademark use, reviewing the agreement and related documents with an intellectual property specialist can help clarify the parties’ rights, obligations, and appropriate legal options.

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Suleiman Al-Omari Intellectual Property Law Office

Suleiman Al-Omari Intellectual Property Law Office provides specialized legal services, including trademark protection, reviewing intellectual property issues in franchise agreements, advising on licenses, trade secrets, and copyright, and handling disputes relating to these rights.

📞 Contact Suleiman Al-Omari Intellectual Property Law Office:

+966537778130

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This article is intended for general educational purposes regarding trademarks and franchise agreements in Saudi Arabia. It does not replace specialized legal advice. Rights and procedures vary depending on the circumstances of each case and the applicable laws.