Franchising and the importance of “brand”

The success of any franchise network is closely tied to its branding, and ultimately both franchisors and franchisees benefit from this.

The whole point of having a recognisable brand is to distinguish your goods and services from competitors, and to create a reputation in the market that customers identify with your franchise network. Brand loyalty is precious and worth protecting, particularly in the digital age where trade and commerce is increasingly conducted on-line.  The following well known examples demonstrate the importance of branding.

Tacos aren’t tacos

When the US based Taco Bell organisation initially entered the Australian market in the early 1980’s, it discovered that there was already a Mexican style restaurant operating in Sydney in 2 locations under the name Taco Bell Casa.  The Americans had registered trade marks in the US, and tried to stop the Australian using the words Taco Bell in connection with Mexican restaurants.

The US franchisor ultimately failed because, although it was well known in the US and owned a number of trade marks there, it did not have any goodwill in the Taco Bell brand in Australia.  Further, Taco Bell Casa had been trading in Sydney for many years prior to the US franchisor entering the Australian market.  Although it only operated 2 restaurants, the Australians could show that there was goodwill attached to its name which Sydney customers were more likely to associate with the Australian restaurants than the US brand.

As a result, the US franchisor was restrained from operating any restaurants in the Sydney metropolitan area using the Taco Bell name or any similar name which was misleading or deceptive, or likely to be so.

No Burger King around here

In a situation similar to Taco Bell, when Burger King went to expand its successful US based operation into Australia, it found that the name Burger King was already an existing registered trade mark held by an Adelaide food shop. Accordingly, the Australian master franchisee was unable to operate under the name of the US franchisor, and chose the name Hungry Jack’s which was derived from pre-existing trademarks already registered by Burger King in Australia in 1974.  The Burger King trade mark held by the Adelaide based owner is now owned by the US Burger King Corporation, but Hungry Jack’s goes on.

Lessons

Existing registered and unregistered trade marks with a reputation can prevent competitors (even large multi-national franchise systems) from using a brand that is identical, substantially identical or deceptively similar in relation to the same or similar goods or services.

When starting up or expanding a franchise system into new territories, take steps to ensure that your brand will not infringe another person’s IP rights, or have the potential to mislead or deceive consumers.

Queries

If you have any questions about this article, please contact the author or any member of our Intellectual Property team.

Disclaimer

This information and contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders and is for reference purposes only.  It does not constitute legal or financial advice.  If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

The Author

Brent Weston

SPECIAL COUNSEL, BRISBANE

Key Contacts

Brent Weston

SPECIAL COUNSEL, BRISBANE

Len Hickey

SPECIAL COUNSEL, MELBOURNE