If Itan approves an Improvement developed by a franchisee, can Itan use it without paying royalties?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.5. Improvements.
If you (or your Owner or employee) conceive of or develop an Improvement, you must send us a notice describing the Improvement.
You must obtain our approval prior to using the Improvement.
Any Improvement we approve may be used by us and any Person we authorize to operate a Salon, without any obligation to pay royalties or other fees to you or any other Person.
You or your Owner or employee, as applicable, must assign ownership of the Improvement to us or our designee, without charge, together with all associated intellectual property rights, including the right to grant sublicenses.
If applicable Law precludes you from assigning ownership to us, then you must grant us a perpetual royalty-free license to use, commercialize and sublicense the Improvement in any manner we deem appropriate.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if a franchisee develops an Improvement and Itan approves it, Itan and anyone Itan authorizes to operate a salon can use the Improvement without paying royalties or other fees to the franchisee or any other person. An "Improvement" is defined as any idea, addition, modification or improvement to the goods or services offered, method of operation, processes, systems, marketing, or intellectual property utilized by an Itan salon.
The agreement stipulates that the franchisee, or their owner or employee, must assign ownership of the Improvement to Itan or its designee without any charge. This assignment includes all associated intellectual property rights, including the right to grant sublicenses. This means Itan gains full ownership and control over the Improvement.
However, if applicable law prevents the franchisee from assigning ownership to Itan, the franchisee must grant Itan a perpetual, royalty-free license to use, commercialize, and sublicense the Improvement in any manner Itan deems appropriate. This ensures that even if ownership cannot be transferred, Itan retains the right to fully utilize the Improvement without any ongoing costs or restrictions. This clause protects Itan's interests and allows them to integrate and disseminate beneficial innovations across the franchise system without compensating the originating franchisee.