WHAT'S IN A NAME? The Heart of a Franchise System
By Kat Tidd
Choosing the right name for a business is a challenge under any circumstances. Does it convey the right message? Is suitable for the nature of the business? Is there anything similar being used? Is it available for use? What kind of exclusive protection can be obtained to keep anyone else from using the name?
Different kinds and degrees of exclusivity can be obtained for the name of a business, its products and services. Making the right choices will ensure the greatest measure of protection and exclusivity for that name. These choices become even more critical for a business that chooses franchising as its method of growth and expansion. The name chosen for the business-and its products and services-is the glue that creates a unified identity that will support and bind together a network of independent franchised businesses.
If a sufficiently unique name is not chosen or the appropriate protective measures not taken from the inception of a business venture, those past oversights may limit the franchisor's ability to expand or to use a single, identifiable name for franchising. For example, not obtaining trademark protection or doing sufficient research before starting a franchising business may result in someone copying the name, using something similar, or-worst of all- having used the name first.
If a "prior user" exists, then the franchisor may well be prevented from using the name it has invested so much in developing and marketing-perhaps only from that market, perhaps completely, or perhaps "only" from obtaining federal trademark registration.
Protecting The Name
A corporate name is merely that, the name of a legal person that is a corporation-and it is nothing more. No other company or business entity formed by a state's authority will be granted the same name, but that is the only protection given.
Obtaining a federal trademark registration is constructive notice, as of the filing date of the application for registration, of the registrant's ownership of the mark. This preserves the right to use and protect the registered mark in future geographic marketing areas. Application for federal registration can be filed based on one's mere "intent to use," rather than "actual use," of a mark. The date that an application is filed will constitute use of the mark in all 50 states for "priority" purposes.
What exactly is a trademark?
A trademark is a symbol, word or words, or design used to distinguish a company's products or services from those of its competitors. It is not the company name. Trademarks are registered in different categories:
• As service marks representing the services of a company (and its franchise system), e.g. Burger King restaurants; and
• As trademarks representing the products of the company, e.g. Burger King hamburgers..
What makes a good trademark?
Finding a unique name that is acceptable for registration by the U.S. Patent and Trademark Office is often a difficult process and one that can conflict with personal and marketing preferences. If it is generic, or too commonly descriptive, the PTO will not authorize registration. The generic name is the common name (noun) of the product or service identified. Think of the trademark as an adjective that must be used with a noun. For example, Mrs. Fields (adjective and trademark) cookies (generic noun). Too often entrepreneurs insist on using a name which, if registrable at all, is so descriptive it's given limited protection even as a trademark.
What rights do franchisees have to use a franchisor's trademarks?
Franchisees are licensed to use franchisor's designated name as a trade name and as service marks to market and represent the services offered by the franchised business. Also, franchisees are given the right to market and sell franchisor's trademarked products. (Another term for trademarked is "branded".) The franchisor may or may not license the right to apply any of its trademarks, including its logos, to products or tangible items . Often that right is reserved for the franchisor who will sell the products to its franchisees, which they may be required to purchase under specified circumstances.
It is important that the franchise system's customers know that trademarked products and services are of an established and consistent quality. It is equally important that trademarks be used consistently and correctly in order to ensure that trademark rights in these marks remain enforceable.
Correct and consistent use of the trademarks strengthens the franchisor's identity and goodwill, as well as contributing to the overall strength of the national system.
To Build a Strong Identity
Making the right choices in the beginning saves a new franchise venture more time, money and energy than can be imagined at the outset. Choosing and registering the right name in the proper trademark classes is an essential step to building a strong and highly recognizable franchise system with goodwill on a national scale.