From Innovation to Franchise: Case Study – How We Legally Structured the CAFE & FACTORY Business Ecosystem
We recently completed a legal project that illustrates in the best possible way what it means when a lawyer does not accompany a client only through a single transaction, but through their entire business development, from protecting an invention to building a complete franchise system. The client in question is CAFE & FACTORY, a Serbian brand that has developed an innovative business model in the coffee sector. On the one hand, a coffee shop with a distinctive design and standards, and on the other, a patented machine for grinding and packaging fresh coffee at the point of sale.
The patent as the starting point
It all started with the invention. The client developed a specialised machine – a device that delivers freshly ground and packaged coffee to the customer directly at the point of sale, on demand. The principle behind this invention was shaped by the client into a philosophy: “Fresh or nothing.”
A patent before the Intellectual Property Office of the Republic of Serbia (IPO) is not just a formality. It is, in fact, an economic instrument: only from the moment the patent is granted can its holder exclusively commercially exploit the protected invention on the territory of Serbia and license or franchise that technology to others. The invention that we protected met all three necessary requirements under the Serbian Patent Act – it was new, involved an inventive step and was industrially applicable. Without that patent, the entire franchise concept that followed would not have had a solid legal foundation.
What makes this project particularly interesting is the following: the patent is not just protection. In the context of franchising, it is the central element that gives value and credibility to the entire system. When a franchisee signs the agreement and pays the franchise fee, they are in fact paying for the right to use not only the brand and know-how, but also the patented technology.
A franchise agreement that had to support two businesses
When we moved on to drafting the franchise agreement, we were faced with a challenge that is, in terms of legal complexity, rarely seen in local practice: the client requested that a single agreement regulate two completely different business concepts, while at the same time these concepts would share the same brand, the same confidentiality clauses and the same termination mechanism.
CAFE & FACTORY is, in fact, simultaneously:
- A café – a hospitality venue with a distinctive interior design, a menu with precisely defined recipes, barista standards, operating protocols and training;
- A factory – a technological concept of selling and packaging fresh coffee at the point of sale, based on a patented machine or a complete technological line with an operator.
We resolved this through a two-module structure of the agreement. Instead of two separate agreements – which would create the risk of legal gaps in overlapping areas – we created a single consolidated document with two clearly separated parts, each with its own definitions, its own description of what is being granted and what is being protected, but sharing common provisions on IP, non-compete and termination.
What it means to precisely define know‑how
One of the biggest legal challenges was to accurately describe what is being transferred under the franchise agreement. Under Serbian law, a franchise agreement is a so‑called innominate contract – there is no specific statute that defines it. We rely on the Law on Obligations, the Trademark Act and the Trade Secret Protection Act, which since 2021 has explicitly required that, in order to be protected, information must be secret, have commercial value and be subject to reasonable measures of protection.
That was precisely our main ambition in the agreement: to list in detail every element that constitutes the protected know how. For the café segment, this means: recipes for all drinks, extraction standards, the work flow (division of tasks between the barista, waiter and support staff), service and guest communication standards, the design of the menu and internal manuals, uniforms and distinctive elements of the interior. For the factory segment: instructions for receiving and storing coffee, procedures for storage and transport, the “directly in the factory” technology and – of course – the right to use the patented machine.
Such an exhaustive list is not the result of bureaucratic fussiness. It is a direct legal consequence of the Trade Secret Protection Act: the more precisely the secret is defined, the stronger the protection and the easier it is to prove in court proceedings.
Training as a legal concept, not just practice
We paid special attention to training – a segment that is often underestimated in hospitality franchises. In the case of CAFE & FACTORY, training is not just a practical necessity – it is a legally relevant mechanism for transferring know‑how and at the same time one of the key elements of the franchise identity.
The agreement regulates in detail the initial and ongoing training of baristas, waiters and support staff, including specific knowledge about coffee (origin, types, roasting, sensory characteristics). For advanced SCA (Specialty Coffee Association) certificates – which have market value and go beyond the standard franchise framework – we designed a special legal arrangement: these programmes are agreed separately, between the franchisor and the specific employee, thereby precisely regulating costs, obligations and possible loyalty clauses after completion of the programme.
Brand protection: broader than one might think
In the agreement, the CAFE & FACTORY brand name is not just a trade name. Protection extends to all variations of the name, including the shortened form “C&F”, all slogans, phrases and texts used in communication with guests, the interior design, the layout of machines on the bar and back bar, distinctive elements of the interior decoration and the design of uniforms. The franchisee is not entitled to register any of these variations in their own name, nor to use them outside the scope of the agreement.
This broad definition of protection is no accident: in a café, the brand does not live only in the logo – it lives in the visual experience the guest has the moment they enter, in the way the barista serves the coffee and in the aesthetics of the menu. All these elements together constitute the distinctive character of the brand in terms of trademark law.
A lesson for business practice
This case illustrates something that is often overlooked in business circles: a patent, a trademark and a franchise agreement are not three separate assignments – they are parts of a single integrated system for protecting the value the client creates.
A client who has developed an innovative machine did the right thing by protecting the invention before commercialisation. A client who has built a distinctive brand is right to protect that brand with a trademark and to require that every element of the visual identity be precisely regulated by contract. And a client who has technology, brand and know how – that client, when entering franchising, has all the levers needed to build a system that can be defended in court in the long term and valued on the market.
CAFE & FACTORY, as a client, understood this logic. Our task was to put it into precise legal wording.
Follow for more legal insights:
