This article was featured in the June issue of Franchise Dictionary Magazine.
My partners and I have launched hundreds of new franchise systems over the years. One of the most difficult conversations we often must have with a new franchisor is telling them that they don’t have a protectable brand name, or that their brand name is owned by someone else.
Many new business owners instinctively want their brand name to let the world know what their product or service is. If you make shoes and the sign above your door just says “SHOEMAKER,” you and I could be having a tough conversation if you want to franchise your business. To start a franchise, you need a trademark, which gives you the right to exclude others from using your brand name in association with a particular product or service. The problem is, the law won’t allow you to prevent your competitors from telling the world what they do.
Your first reaction to hearing the news is usually: “But that’s been my name for ten years,” “It’s how my customers know me,” “What about my goodwill?” and “How will people know what I do?” Often the owner wants to make it a decision about whether franchising is worth changing their name. This is the wrong question. You are not changing your name so you can franchise. You are changing your name because you don’t have a brand name you can protect as you grow. As your business matures, you are building enterprise value, but you are not building brand equity. Many emerging brands skip over this step and start their franchise with a weak trademark they can’t protect as they grow.
As the saying goes, “The best time to plant a tree is 20 years ago. The second best time is now.” If your name describes your business, or if you know of others throughout the country with the legal right to use a similar name without being your franchisee, you need to take action. The sooner you act, the sooner you will begin to build real brand equity. When you are successful, your business will be worth exponentially more if it has an identifiable and protectable brand name. The five most valuable brands in the U.S. are Apple®, Google®, Amazon®, Microsoft®, and Visa®. With the possible exception of Microsoft®, you wouldn’t know what any these companies do just from their names. When thinking of your new name, arbitrary (having nothing to do with your product) or fanciful (made-up) terms make the strongest brands.
If you are a franchisor with an overly descriptive and inherently weak trademark, now is the time to think long term and to build the foundation of your brand under a name that you can protect.
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