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How to Prepare a Concept for Franchising: Developing Trademarks

Question:

I have been reading with interest the series in the Michigan Restaurateur on how to prepare a concept for franchising. I understand that I need to develop my brand, systems, operations and unit economics. I also understand that I need to duplicate my concept in different markets. What else should I consider before I franchise my concept?

Answer:

A fundamental premise to franchising is that your franchise is associated with a trademark. You must develop your trademarks and protect those trademarks, in order to license those trademarks to prospective franchisees.

Trademarks are words, logos, or slogans that identify you as the source of the goods or services. Trademarks should trigger a response that brings your brand to mind. For example, when you hear the trademark “Whopper®,” you probably associate that trademark with Burger King® as the source of the trademarked good. That is a strong trademark. Although it may seem counterintuitive, the weakest trademarks are those that simply describe the product or service at issue. Such marks are difficult, if not impossible, to register (e.g., “Grand Rapids Hamburgers,” “John's Italian Restaurant,” “Hot and Delicious Pizza”). Note that each word in these examples is descriptive of the actual thing being sold and that none are particularly creative. Fanciful, arbitrary, and suggestive marks are the strongest and most easily capable of becoming registered trademarks. Fanciful marks are made-up words invented for the sole purpose of functioning as a trademark (e.g., PEPSI). Arbitrary marks are known words used in an uncommon way (e.g., APPLE for computers). Suggestive marks require imagination to reach a conclusion as to the nature of those goods or services (e.g., MUSTANG for cars). Note that none of these kinds of trademarks describe the product or service at issue.

You must develop a restaurant name, menu items, and slogans that can be trademarked. It is best to register your trademark with the United States Patent and Trademark Office. These trademarks are recognized by the ® symbol. Federal trademark registration provides notice to the public of the registrant's ownership of the trademark and a legal presumption of the owner’s exclusive right to use the trademark nationwide in connection with the goods or services listed in the registration. Once federal registration is obtained, subsequent users are prohibited from using a confusingly similar name or logo. However, existing users with confusingly similar names or logos are allowed to continue, but may not expand out of their current market area.

Restaurant owners commonly wish they had spent more time developing their trademark strategy at the outset, rather than waiting until their brand becomes popular and well-developed. In the worst case scenario, a restaurant owner might choose a trademark that has already been registered by another restaurant owner. Another common problem is a restaurant owner’s failure to determine whether a trademark being adopted is unique and strong enough to become a registered federal trademark in the future. All too often, a successful restaurant’s owner will decide to expand the concept, only to find out that the trademarks associated with the brand are not capable of federal registration. As you are developing our systems, operations, and multiple units, you will want to federally register your trademarks. Do not wait.

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