Using Trademark Law to Build a Moat Around Your Restaurant Brand

I.  Restaurants build moats around brand names and products with effective trademark registration and enforcement strategies.

A “moat” is a deep and wide trench around the rampart of a fortified place (as a castle) that is usually filled with water.  The purpose of a moat is to create a protective barrier around an important strategic target, and dissuade or discourage would-be attackers.  In the Middle Ages, the strategic target was a castle.  Today, the strategic target is your brand.

Your brand is at the core of your business.  It is a symbol used by consumers to recognize you and distinguish your value proposition from your competitors.  And as you know, a good, strong brand requires a significant investment of money and effort to build, and something of such value to the business should also be protected.  A well planned and executed trademark registration and enforcement strategy can be one of the tactics used to protect a brand, and such a “moat” will help you defend your brand against the onslaught of attacks from others in a highly competitive environment.

A.  The benefits of a Strategy

The key is to have a strategy.  A well-thought out and articulated strategy can help protect your brand and support your ultimate business objectives; and, often, the more aggressive the strategy the more valuable the brand.  For example, the E.A. Sween Company has 29 active US federal trademark applications and registrations for the mark DELI EXPRESS mark for sandwiches distributed through convenience stores, and they are extremely active with their enforcement efforts by seeking out and challenging all users of the phrase “deli express” and opposing all trademark applications that include the phrase.  Out of 11 trademark applications that include the terms “deli express” only 1 pending application remains, and that is likely only because it is relatively new.

You might ask yourself, how does a company come to “own” the term DELI EXPRESS for sandwiches?  The answer is 29 trademark registrations, and the will to enforce the rights granted by those registrations.

In-N-Out Burger, a leading California-based quick service brand, is another company that takes its trademark protection and enforcement program seriously.  In addition to protecting its principal names, key slogans, and certain menu items, the company has even aggressively protected its “secret menu” items.  This includes obtaining federal registration of the word PROTEIN in connection with food preparation, as the secret menu enables customers to purchase burgers “Protein-Style” (without a bun).  Although it is unknown whether In-N-Out was the originator of the term “Protein-Style” as a manner of preparation, it has effectively built a barrier to prevent any other brands from using the same or similar mark to describe this type of offering.

B.  The disadvantage of not being aggressive about your brand protection

Brand protection is not all that sexy, and the investment does not directly generate revenue.  So in the short term the costs of a robust and aggressive brand protection strategy can seem high in comparison to the value.  However, a failure to protect a brand, and all of the various trademarks that make up the brand, can have a significant negative financial impact on the value of a business and the longevity of the brand.  Brands that have not been well protected don’t stand out in the minds of consumers and make the work of differentiation from the competition much harder, and this does directly affect revenue, usually with downward pressure.  These unprotected or poorly protected brands are therefore less valuable or of no value to acquirers or investors, and discounts to the overall valuation of business are likely to be applied.

In addition, the failure to take adequate steps to clear and protect trademarks can have a limiting effect on growth and expansion options for a business.  For example, companies that franchise in the United States are required to provide a list of the principal trademarks that prospective franchisees are required to use in the franchise disclosure document (“FDD”) that must be provided to all prospective franchisees (with certain exceptions) before the business can sell the franchise.  Not only does the absence of federally-registered marks create a heightened risk of potential infringement actions in the implementation of a franchise program, franchisors, in the FDD, must include a message to prospective franchisees alerting them to the fact that the absence of federally-registered marks presents this type of risk.  Cautious franchisees will factor this information into whether to acquire the franchise.

II.  Survey of top 50 restaurant chains (based on sales volume) demonstrates heavy trademark protection activity by most brands.

The notion that an aggressive brand protection strategy tends to add value to a brand is something that the top 50 restaurant chains appear to know already.  A survey of the trademark registration activity of the Top 50 Restaurants (based on sales volume) is telling.  The heaviest registration activity is attributable to the quick service restaurant segment.  McDonalds has 477 registered marks, 25 pending applications and over 1,300 inactive marks.  The number of inactive marks is interesting because these filings appear to represent an aggressive registration effort even for marks that are not core to the McDonalds business and that have come and gone from the McDonalds brand portfolio.  Burger King has 126 registered mark, and 19 pending applications, and Wendy’s has 70 registered marks, and 4 pending marks.  In all cases, these chains are filing for trademark registration for many, many marks in addition to their “core” trademarks.  This aggressive filing for trademark protection for various trademarks and sub-brands, in addition to obtaining the very broadest registered protection for core brands, builds the “moat” that protects the brand.

While the quick-service segment is the leader of this strategy, the casual dining segment, including Applebee’s, Chili’s, and TGI Friday’s are also employing the tactic of aggressive registration strategies.  Each of these brands has about 40 trademark registration each.

III.  Conclusion:  Make the effort to develop and implement a brand protection strategy.

Not every restaurant business has to be as aggressive with trademark filings as McDonalds, but having some brand protection strategy in place, no matter how conservative on the one hand, or aggressive on the other, is an important part developing an maintaining brand value.  Take appropriate steps to protect your most important trademarks.  Register your trademarks and enforce your rights.  Consider being more aggressive in building your moat, and consider developing and registering supportive sub-brands.  Consider the value to the brand of developing a reputation of being a trademark owner that aggressively pursues registration for its trademarks and takes action against infringers.  You may find that the long-term increase in brand value is greater than the short-term costs.