What does a hamburger joint, cookie company, and BBQ stand have in common? They each had insanely popular and profitable brands that were unwittingly signed away—with the simple stroke of a pen.
McDonalds was created in 1940 by two brothers, Richard and Maurice McDonald. They were at the forefront of change in the restaurant business. At a time when carhops were all the rage, their business model caused for customers to leave their vehicle and walk to the window to place their order. Instead of waiting of what could seem like ages to the hangry, customers received their orders almost instantly. Their rigid business system created efficiently and eventually caught the attention of traveling salesman Ray Kroc. Kroc convince the brothers to not only franchise their business but to let him oversee the franchise division. If you haven’t watched Founder, The McDonald story, please do so now. There are so many business lessons here. After selling the company the brothers attempted to continue selling burgers, but were met with a cease and desist letter. Not only did they sell their business, they sold all their rights to their name. Even worse Kroc reneged on a handshake deal that was to pay the brothers a percentage of the revenue from the franchises.
Which leads to this question: What is a business?
Many would argue that it’s the systems put in place to produce a product or service. Others would say that a business is more, much more. It’s the relationships you build with your customers. It’s the trust you’ve gained. The promises you make and keep. All of those things are encompassed and are instantly recognized through business brand identifiers—trade names, logos, taglines, etc.….
Wally Amos was the founder of the Amos chocolate chip cook brand. After serving in the military he became the first black talent agent in the history of the William and Morris Agency. He discovered Simon and Garfunkel, worked with Diana Ross, Marvin Gaye and Sam Cooke. Eventually, Amos left the William and Morris Agency to start his own production company. When it did not pan out, Amos took the skills he learned from years of baking with his Aunt and entered into the cookie business out of necessity. Using a modified version of a family recipe he began to produce and sell luxury cookies. He went on to open multiple stores on the west coast and partnered with Bloomingdale’s of New York to distribute his cookies. After a few years of financial difficulty Wally Amos sold his cookie company. Once again facing financial trouble he opened another cookie company called Wally Amos Presents Chip & Cookie. He was immediately hit with a lawsuit. When Amos sold his business, the contract included a clause that prevented Amos from not only using his name he also couldn’t use his likeness on the packaging of any food products. Ouch!
TRADEMARKS ARE ASSETS.
In business you should never be so focused on short-term gains that you fail to calculate the long-term effects. With the assistance of a lawyer it may be possible that the financial gains can exist outside of the moment. McDonalds and Amos were bought out in 1966 and 1991 respectively. Since that time it would seem that some business owners have yet to figure out rule #1: What’s tragic about these stories is that the original founders did not even realize they were signing away the family’s name.
Assumptions have no place in business. You must communicate and memorialize your intent into a written contract. While oral contracts are valid they can be difficult to enforce. See the McDonald’s story above.
The BBQ Stand
Stubb’s Legendary BBQ joint, out of Austin, TX, is changing its name as a result of a two year trademark battle. Prior to the suit, C.B. Stubblefield was granted the use of the Stubb trademark for the original Stubb’s restaurant after the sale of Stubb’s BBQ sauce to food giant, McCormick & Co.
It’s not uncommon for larger brands to acquire smaller brands with the intent to gain access to their loyal customer base. The acquisition makes it easier for them to transition into a new market space.
Although the sale did not include the restaurant and music venue, Stubblefield found himself in hot water when he expanded his restaurant venues using the Stubb’s brand. The expansion using the Stubb’s trade name was not considered in the contract. (remember rule number 1) After the resolution of the trademark issue, One World Foods, Inc. is now considering opening it’s own chain of restaurants using the Stubb’s brand.
Use written contracts, consider the long-term effects of your actions, and review your contracts thoroughly before you sign them. Need a contract? Contact Off The Mark for your contract needs.
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