Fred Coben is the owner of a very successful coffee shop business. Back in 1995 he came up with the idea of setting up a coffee shop called “Cobean Coffee Shop” in Morningside in Brisbane. The name was obviously a play on his name and he felt that it was different enough from other businesses that sold coffee to be unique. Fred developed his business into a thriving business and had started other businesses in locations all around the local area, West End, Caboolture, Burpengary, Redland Bay, Loganholme etc. Fred was in Phase 7 – Expansion/Franchising and Licensing Phase of the Business Legal Lifecycle.
Cobean Coffee Shop had become a local institution wherever it was located. Fred was constantly amazed at how his coffee shop was doing so well when other local businesses failed all around him. People enjoyed the brand of his coffee and the way that he brought a personal touch back to the dry coffee shop scene. Customers would often comment that when they were in other parts of the city they would seek out Cobean Coffee Shops because they knew what they were getting, a great personal experience with a great cup of coffee.
Often Fred would be approached by other people that would want to take on his model and for 20 years Fred did not want to lose control of his business.
In 2016 Fred decided that he wanted to develop an exit strategy for his business, he had developed the business into a thriving profit making machine but he wanted to do something else. Fred was 50 years old and knew that he could not continue to operate these businesses for the rest of his life. He decided that he would set up a franchise model for his stores with a view to taking on other franchisees and then to sell the franchise business to a larger coffee chain or investor.
When Fred approached his lawyer the lawyer went through his plans and advised Fred of what he needed to do. Fred found out that he had a number of things to do before he could franchise his business:
- Firstly he needed to put together a product to sell, what was the product? well the product was the manual on how the business was operated so that the people buying the franchise could operate it the way he wanted it operated;
- Secondly he needed to approach a marketing company that could market his franchise to prospective franchisees and speak to the people that had previously approached him about becoming franchises;
- Thirdly he needed to work out how he was going to train the franchisees and their staff to make sure that they had all of the requirements that he wanted to protect his brand; and
- Finally he needed to protect his intellectual property including the name and brand of the business as this was part of the package that was very attractive to buyers.
Critical to Fred’s plans was to establish a trademark for the well known name of the business. He had not done it before as whilst he was making great money from the business he did not want to go to the expense of trademarking his business name and skipped Phase 5 of the Business Legal Lifecycle, Protecting Intellectual Property.
The lawyer did a quick google search of the business name “Cobean Coffee Shop” and was surprised to discover a number of other businesses in the Brisbane named “Cobean Coffee Emporium” and other ones in Sydney and Melbourne named “Cobean Coffee”. Whilst their logos were different it was clear to Fred that his name was not as unique as he thought. The solicitor then undertook a search of the trademark register for the word “Cobean” to Fred’s surprise the words “Cobean Coffee” had been trademarked by a large coffee conglomerate business in Sydney and they were the ones operating the business in Sydney and Melbourne, and had been operating since 1997.
Fred was devastated, the brand that he thought was his, the brand that he thought was unique and special was not and that many of the people that were coming to his store were actually mistaking the business as being related to the coffee shops in Sydney and Melbourne.
What this meant for Fred was that before he could start selling his franchise business he had to spend time and money rebranding all of his stores, social media and advertising. This expense was well over $100,000.00 all of which could have been saved if he had spent a few thousands of dollars early on to make sure that his trademark was unique and he was protected through registration.
This story, unfortunately is not all too uncommon in businesses around Australia. Often when people start a business they do not have the money or knowledge to protect their intellectual property. In developing the Business Legal Lifecycle we realised that this was one of the main impediments for business owners in taking this step. Under the Business Legal Lifecycle, registering a trademark falls into Phase 5 – Protecting Intellectual Property. This is done for the deliberate reason that often whist it is not feasible for a business owner in Phase 1 – Conception, or Phase 2 – Startup for a business owner to register a trademark for their business by the time they get to Phase 5, after having gone through Phase 3 – Initial Clients and Phase 4 Bringing on Employees, there is something to protect in registering the trademark. Spending the money at this point in time to register their business’s trademark is when we have seen successful businesses thrive and really build their business.
Also this does not just apply to businesses as large as Fred’s, even if Fred had one coffee shop, if the larger business had found out that he was using their name then Fred would have forced him to stop, even though he was trading first as they had a registered trademark.
If you would like to know more about Protecting Intellectual Property or the Business Legal Lifecycle in general please contact our office on 07 3667 8966 or email us at firstname.lastname@example.org.