Franchising - The Licensing Of Trademarks And Methods Of Doing Business

Franchise is a method of doing business by licensing trademarks. A recurring royalty fee being the prime source of income, the advent of franchise business dates back to the 1850s. The earliest example being the bars of New South Wales, the agreements between these bars and the breweries can be considered the foundation for modern franchise businesses. Further examples of early franchises include the telegraph system (operated by various railroad companies but controlled by W...

Keywords:

franchise,franchising,business

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Franchise is a method of doing business by licensing trademarks. A recurring royalty fee being the prime source of income, the advent of franchise business dates back to the 1850s. The earliest example being the bars of New South Wales, the agreements between these bars and the breweries can be considered the foundation for modern franchise businesses. Further examples of early franchises include the telegraph system (operated by various railroad companies but controlled by Western Union) and exclusive agreements between automobile manufacturers and local dealers.

The term franchise holds multiple definitions. Encompassing a plethora of varied business relationships, franchises sometimes do not follow their legal definition per se, for example, an appliance maintenance franchise. In this case, though the after sales services are supposed to be done by the manufacturer, they grant the license for maintenance to some other party, thinning down further the dividing line between outsourcing and franchising.

A franchise agreement is the first step between the willing parties; the agreement binds the parties together through contractual provisions, strengthening further the arrangements of selling one’s own products or services through another person holding the license. The agreement also specifies the area of operation under the franchise holder, though the franchise provider usually denies a complete and exclusive control of the franchise holder over that particular territory. Franchise in the US abides by the jurisdiction granted by the state and federal laws though there is no federal registry of franchising or any federal filing requirements for information. However, franchise holders are required to have a Uniform Franchise Offering Circular (as per the Federal Trade Commission rules); it helps in disclosing the business transactions and purchases that remain involved. As of now, the Financial Times declared that if sales by US franchise businesses were translated into national product, they would qualify as the 7th largest economy in the world.

Franchise-based restaurants opened gates for the wave of franchise businesses since the 1930s. First came the traditional sit-down restaurants (Howard Johnson's) and then McDonalds in the 1950s rendering United States a franchise business dominion to the point where proprietorship business has become the exception rather than the rule.

Effective Trademarks - How to Select a Good Name

Several key points to remember in selecting a trademark to avoid problems and to ensure you stand out from the crowd.

Keywords:

how to select a good trademark, distinctive trademark, trademark protection, trademark, registered trademark

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Your trademark is the most important asset your business will ever own. A good trademark will distinguish you from the competition and help you stand out in a crowd. A poor trademark will entangle you in legal disputes and blunt your marketing efforts. Selecting a good trademark is as simple as following the following guidelines.

1. Avoid Trademarks that cannot be Registered. There is no point investing in a trademark that you can’t register. Registering the mark protects it from competitors, ensures your ownership rights in the mark and makes it easier to enforce your rights against copy cats. As you will read below, certain types of words are inherently poor choices for inclusion in a trademark because they cannot be registered.

2. Avoid Purely Descriptive Words. Words which describe the nature or quality of the goods or services sold with the mark are not permitted to be registered. Hence, the mark “Cold Beer” for use with malt beverages cannot be registered because it describes the actual product being sold. If registered, it would prevent anyone from using the terms Cold and Beer to describe their malt beverage.

3. Avoid Surnames. Surnames cannot be registered as trademarks. Hence the mark “Wilson Power Boats” is a poor choice for a trademark because the word Wilson is a surname (and the rest of the mark is descriptive).

4. Avoid Confusing Trademarks. A trademark which is confusingly similar to a registered trademark cannot be registered. Hence, the mark “Sun-Screen” cannot be registered if the trademark “Sun Screen” has already been registered for a similar type of product. A search of the US Trademarks Database (www.upto.gov.) and/or the Canadian Trademarks Database (www.cipo.gc.ca) is a good idea.

5. Avoid Generic Words in a Trademark. The goal is to select a trademark which is as unique and distinctive as possible; therefore, avoid generic words. Examples of generic terms include “green, superior, Canadian, American, deluxe, gold, premium, economy,” and a plethora of others. These words are generic and if you incorporate them into your trademark, you ensure that you blend into the crowd, not stand out in front of it. Geographic words fall into this category.

6. Avoid TLA’s (Three Letter Acronyms) and Numbers. IBM, ATT, and CNN are distinctive trademarks because their respective owners poured tens of millions of dollars into making the marks famous. Even a poor trademark can be made famous if you through enough money at it. But acronyms are intrinsically difficult to remember, while words, especially colorful words, are easily remembered. Hence “ELS Software Solutions” is not as memorable as “Volcanic Silicon.” Likewise, avoid using numbers in a trademark as they tend to be less memorable. Furthermore, there are a limited number of unused acronyms available, so there is an excellent chance that your TLA will be confused with someone else’s.

7. Do use invented words. Invented words are words which do not exist in any language, apart from your trademark. Examples include Spandex, Exxon, Kodak, Viagra, and several other famous trademarks. Invented words are a good choice for use as trademarks because they are not descriptive and they tend to be quite distinctive. You can create an invented word by simply combining parts of other words. For example, Microsoft is a combination of “Micro computer” and “software.”

8. Try animal or plant names. Animal and plant names tend to be quite memorable and, if used appropriately, can convey a good image while still being distinctive. Apple Computers is a good example, but other examples include Tiger Direct, Ford Mustang, and countless others.

Finally, make sure that the first word in your trademark is as distinctive as possible. It is often necessary to add descriptive words to the trademark in order to convey what is being sold or marketed in association with the mark. If generic words must be included then it is doubly important to ensure that the first word of the mark is as distinctive and unique as possible.